African Bank Holdings Ltd. is joining the rush into digital banking to fail-proof the business and provide an exit for shareholders that resurrected the South African lender from its collapsed former parent.
The firm's unusual owners, which includes the SA Reserve Bank and six of the nation's largest lenders, stepped in to save it with an equity injection when African Bank Investments went into administration five years ago. Now, as the business gets back on its feet, the bank's competitors will want a way out, whether that be an initial public offering or a takeover, said Chief Executive Officer Basani Maluleke.
"We're re-positioning the bank, so we can have that conversation with our shareholders when the time is right," she said in an interview in Bloomberg's Johannesburg offices. "Starting our new product offering is our immediate focus as we build the bank."
African Bank is staging its comeback in a much tougher economy and a crowded field as its bigger competitors and owners, including Standard Bank Group and Absa compete more aggressively to boost revenues. At least three new players are entering the industry, hoping to draw away customers with low-cost digital offerings.
African Bank's peers came to the rescue to protect the nation's financial system when too many of the lender's customers defaulted on their unsecured loans and it was unable to raise more cash on capital markets. Now, the bank is diversifying its revenue base away from unsecured credit, and trying to raise deposits to strengthen its funding base, Maluleke said.
"There's no question that unsecured lending will remain a significant contributor to our revenues over the medium term," the CEO said.
African Bank is launching a transactional-banking offering to clients and will add more products, such as additional insurance policies. The lender is partnering with Direct Transact Pty Ltd., a Pretoria-based provider of electronic-banking and payment processing services, and Portuguese financial technology firm, ebankIT.
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"We're very pregnant with our digital-transaction banking product," Maluleke said. "It's being tested by employees and made available to some of our customers already."
After tightening its credit risk appetite, African Bank is digging deeper into client data to find other ways of growing the business, Chief Financial Officer Gustav Raubenheimer said in the same interview. For example, it's extracting information from two different credit bureaus rather than just relying on one.
African Bank will also keep prices low and turn its 392 branches into service hubs where clients can seek advice, Maluleke said.
The company is aiming to grow non-interest revenue to more than R500m by 2021, from R27m at the end of September, and more than double its customer base to 2.5 million by then.
"While changing our unique shareholder structure is important, it is not on the front burner," Maluleke said. "Our aim is to first create an asset that investors will be keen to buy into."