Ithala is exploring strategic partnerships with other banks to reduce its losses and stay afloat.
This emerged on Tuesday when Ithala presented its 2025/26 budget to the finance committee of the KwaZulu-Natal legislature in Pietermaritzburg.
The beleaguered entity presented a grim outlook for its financial position, largely owing to the restrictions placed on it by the Repayment Administrator (RA), acting on behalf of the South African Reserve Bank’s Prudential Authority.
Ithala has not been trading since January 16 when the RA lodged a court application for it to be liquidated, citing legal and technical insolvency. Ithala has been unable to access the revenue it generates, while depositors have not been able to access their funds.
Ithala CEO Dr Thulani Vilakazi said they anticipate the current operational conditions would persist during the 2026 financial year and the bank expects to incur a large deficit that will require the provincial government to step in.
He said finding strategic alliances with another bank to begin trading again and keeping costs at a minimum are their key focus areas as they try to steady the ship.
“This financial year, because we are conscious of the fact we need to regularise our existence, we are embarking on finalising a strategic bank alliance, which is quite important because this deals with the issue of how Ithala continues to operate within the available strategic framework.”
Ithala CFO Mohamed Gafoor said management would be looking at the various alliance options available to them and conducting the due diligence required to transfer the deposit book to the partner they choose. They hope to finalise this before the 2027 financial year.
“Under an alliance partnership we will continue business for the alliance and earn a fee income through that alliance.”
However, Ithala will have to source funding to transfer the deposit book to the alliance partner.
“We will have to call on the guarantee [from provincial government] or take up a loan with National Treasury or any other source of funding to fund the transfer of the deposit book because we will be passing on a liability to them and they will require some sort of assurance in terms of the repayment of those loans.”
Gafoor said they expect to incur financial deficits for the next three years.
“Currently the allocation for our current financial year is only R51m, however, the critical expenses that we’re anticipating, which we will try to maintain to a minimum,, are about R360m, which requires about R30m per month. These costs include legal costs of the ongoing matters and insurance costs of Ithala’s assets,” he said.
“So we’re anticipating a huge deficit for the 2026 financial year of R308m.”
Gafoor said they have started discussions with the provincial government about repurposing the R300m guarantee it placed to safeguard the depositors to instead cover the deficit they expect to incur.
He said the entity, in the meantime, has implemented cost-cutting measures and managed to cut expenses from close to R500m a year to R452m in this financial year.
He said they are also aware they will experience reputational damage.
“We are expecting clients to walk away once operations begin, however, we have to build up and create a new reputation going forward.”
With the liquidation process still hanging over them and court dates not yet set, Gafoor expects the financial conditions facing Ithala to remain for the 2026 financial year.
He said they expect the court to sit between September and October on their matter with the RA, and the judgment to be passed in early 2026.
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