Marcus bails out African Bank

African Bank will get a R10-billion injection from the Reserve Bank to stave off its collapse.

Banks including Barclays and FirstRand, and the Public Investment Corporation, have agreed to underwrite the capital raising, Gill Marcus, governor of the Reserve Bank, said yesterday.

African Bank was put under administration, she said, as "a protection procedure to give the bank time to come up with a rescue plan".

The lender was back in the headlines again when it said on Wednesday that CEO and founder Leon Kirkinis had resigned and that it needed a capital injection of at least R8.5-billion - after raising R5.48-billion in December.

African Bank will be split into a "good" and a "bad" bank, with the former getting the recapitalisation funds, Marcus said.

Part of African Bank's troubles stem from its R9.2-billion acquisition of furniture retailer Ellerines in 2008, which resulted in losses and write downs when furniture sales plummeted.

African Bank does not take deposits and typically gives small loans not backed by assets to low-income earners, many of whom are struggling to keep up with repayments amid rising unemployment and inflation.