African Bank founder quits

2014-08-06 11:10

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Leon Kirkinis, the chief executive and one of the founders of the troubled African Bank Investments Limited (Abil), has finally fallen on his sword following news of massive losses and an R8.5 billion funding requirement.

Soon after its announcement, the share plunged more than 60% to R2.60 as investors indicated they could take no more bad news. By noon on Thursday, it had lost a further 89% and was trading at 30c.

Abil announced today that Lirkinis had resigned with immediate effect. His resignation coincided with the announcement of even more losses and another plea to investors to raise R8.5 billion.

The bank’s update for the third quarter to end June showed that nonperforming loans decreased, but this level of improvement was “not adequate to achieve the targeted returns, particularly against the deteriorating economic outlook”.

The company has made numerous “risk cutbacks” to improve its financial position.

At Ellerines, sales of R2.8 billion for the nine months to end June were down by 12% and this decrease, together with a high fixed cost base, “continue to put pressure on Ellerines profitability”. It remains loss-making.

The board is implementing a number of steps to secure Abil’s future, including getting rid of Ellerines and securing liquidity:

It is looking at isolating African Bank from the effect of bad loans, a move which could positively affect Moody’s rating;

It is implementing measures to reduce risk and has reduced loan sizes and terms;

It is aligning impairment provisioning practices to the industry standard – a move which will amount to R3 billion; and

It plans to talk to shareholders about raising the R8.5 billion.

The banking unit will show a loss of at least R4.6 billion for the year. The retail unit’s loss will be at least R1.7 billion. These will bring the group’s loss to at least R7.6 billion.

Chief Financial Officer Nithia Nalliah will act as chief executive.

» This story was updated after first published to add the latest share price.

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