African Bank's shares (if trading in them had not been suspended) would most likely have jumped on the news that Brian Riley, Wesbank's former CEO, was coming out of retirement to try to help the troubled lender get back on its feet. Investors seem to have confidence in his ability to lead the bank.Paul Theron, Vestact asset management CEO, described him as a "good oke"; Wayne McCurrie, head of portfolio management at Momentum Asset Management, said Riley was a "very experienced banker"; and Ian Cruickshanks, an independent analyst, called him an "excellent manager".Michael Jordaan, First National Bank's former CEO, summed up the appointment on Twitter as a "great move".African Bank collapsed spectacularly in August last year after a bout of bad lending, mounting losses, poor management and the sudden resignation of its long-time CEO Leon Kirkinis.This culminated in the share price going into free fall before the JSE suspended trading and the South African Reserve Bank stepped in to prevent a banking crisis.story_article_left1Riley's first call of duty once he takes over as head of African Bank's "good bank", according to Jordaan, will probably be to assemble the right team around himself."Positions such as chief investment officer and head of risk are crucial. Formulating the strategy for approval by the board and shareholders will also be high on the list."Jordaan, who has previously worked closely with Riley, knows him as a "no-nonsense businessman", meaning he does not play politics and simply takes the right business decision, even if it is tough.He said some of Riley's biggest challenges would be to develop new business and increase sales and collections."From a compliance perspective, African Bank must ensure that it meets the criteria of the National Credit Regulator, such as doing a proper affordability test before advancing funds and not relying on illegally obtained emolument attachment orders to collect funds, and get ready for probable and desperately needed caps on credit life premiums," Jordaan said.Riley, who accepted the job after a month of negotiations, said in an e-mailed statement that he was eager to get to grips with the bank on an operational, financial and brand level.Chris Steward, head of financials at Investec Asset Management, said Riley would have to work hard at winning credit suppliers' confidence because the ongoing funding model would be key to the bank's success.Steward's view was echoed by McCurrie, who said pension funds and unit trusts that previously funded African Bank would think twice before they lent money to the bank again.story_article_right2He said the money market would likely demand a "fat premium" to compensate for any potential risks.It will be up to Riley, Louis von Zeuner - who is African Bank's chairman-designate (and Absa's former deputy CEO) - as well as the incoming executive to convince the wholesale funding market that African Bank's business model is viable.This is will be a mammoth task, given that the wholesale market is still jittery about the bank. If "fat premiums" are imposed on the Midrand-based bank in an environment where rivals such as Capitec are approving unsecured loans at lower interest rates, African Bank would not be able to pass on the costs to consumers. Essentially, its margins will be squeezed.Should Riley opt to raise capital via a rights issue, he will have to do that very cheaply because the stock market has been burned and "probably more so than bondholders", according to McCurrie. "It will take years for the stock market to forget something like this," McCurrie said.Steward said he believed Riley would have not accepted the job offer if he doubted he could turn the business around.Jordaan shared similar sentiments, saying Capitec had proven that microlending could be very profitable provided the right initial and ongoing credit-scoring systems were in place."Winning consumer trust will be a challenge but given that retail investors have not lost any deposits, it is not insurmountable. The next big challenge is to restore staff morale," Jordaan said.Riley retired from Wesbank in 2013 after serving as CEO for seven years. He has skills in instalment credit, given that Wesbank is the undisputed market leader in vehicle finance. Wesbank also has a large personal-loan business and a large shareholding in Direct Axis, which is a very successful direct lender, said Jordaan.The unsecured lending field is a space he knows extremely well - making African Bank "lucky" to have Riley, according to Tom Winterboer, African Bank's curator.Riley's appointment was made in the same week that the National Assembly voted in favour of the Bank Amendment Bill. The bill makes it possible for African Bank to restructure into the separate "good bank" and "bad bank" envisaged by the Reserve Bank in August 2014, when the bank went into curatorship.The bill will enable the curator to raise the much-needed R10-billion in capital and also prevent the loss of about 5000 jobs. However, this will be dependent on the curator being able to dispose of assets and liabilities into the "good bank".Winterboer expects the " good bank" to be operating from October this year. African Bank's trading suspension on the JSE will likely be lifted in two years , according to Winterboer.The lender needs to build a good track record before trading recommences. "The first two years will be difficult," Winterboer said.The bank has a R26-billion loan book, according to Winterboer, who said the bad loans would remain with the "bad bank", which has been taken over by the Reserve Bank.Winterboer said African Bank's financial results were expected to be published before the end of the month...