Tag: bank

Standard Bank to retrench 526 IT workers

By Kabelo Khumalo for IOL 

South Africa’s jobs bloodbath is raging with Standard Bank today announcing that the restructuring of its IT division will see more than 500 workers sacrificed.

Standard Bank spokesperson Ross Linstrom says of the impacted permanent staff, the majority are in the executive and managerial bands.

“This process will result in 526 IT employees receiving Section 189 notices which will commence the consultative process with the employees involved”.

“This process will create over 180 new-generation IT positions within the bank. Regrettably, this will also result in the loss of a number of existing traditional IT positions,” Linstrom said.

The bank said the restructuring was instigated by “emerging technologies and increased demands from customers”.

The unrelenting jobs bloodbath seems to be gathering steam. Power Utility Eskom has already announced plans to cut its workforce, the SABC has said it would have to let go of more than 1 000 workers for it to keep afloat. Telkom’s subsidiary BCX last week also joined the bandwagon and warned that it will retrench about 700 employees.

Ironically, as part of stemming the jobs bloodbath, all stakeholders at the Jobs Summit held last month had committed themselves to concrete steps to avoid retrenchments and support struggling companies.

Discovery launches new ‘tech-led’ bank

Source: Fin24

Discovery has launched its much anticipated bank, hailed as the first in rewarding good financial behaviour.

Speaking at the launch of Discovery Bank at the firm’s headquarters in Johannesburg, CEO Adrian Gore said, “The purpose of the bank is making people healthy in a financial sense”.

“It is a tech-led bank that is aimed at incentivising behavioural change,” said Gore.

He said the bank would be mobile-led and accessed from your phone. It will also be linked to the company’s Vitality Rewards programme.

“Everything is on the face of the app, the functionality is amazing with real time EFT payment to all banks,” he said.

Gore said, however, they would not be disclosing the bank fees as yet.

He said 10% of the bank would be owned by black depositors, adding however that it was not a BEE scheme.

In terms of the interest rates structure, Gore said it would be market-related combined with the client’s vitality status.

Clients would also be able to withdraw cash at any ATM while Gore said there are plans to set up one branch inside the company’s Sandton offices.

He said the bank’s target market was “very broad” – from a high LSM to the lower level.

By Warren Thompson for Business Day 

The South African Reserve Bank painted a grim picture on Monday that suggests as much as 75% of VBS Mutual Bank’s assets may have been stolen by its executives and directors.

“It’s a travesty that the failure of management put so many depositors at risk,” said Bank governor Lesetja Kganyago, at a media conference on the curatorship of VBS.

“Institutions such as banks rely on the governance processes, but when it’s the people responsible for the bank that are the ones perpetrating the crime, no amount of regulation can prevent that,” he said.

VBS, which was formed as a building society in the former Venda homeland, came to national prominence in 2016 when it gave former president Jacob Zuma a R7.8m loan after he was ordered to repay the state for upgrades made to his Nkandla home.

The bank’s failure may yet have grave consequences for municipalities in some of the poorest parts of the country, which stand to lose almost all of the R1.6bn they deposited with VBS, increasing the risk of budget shortfalls and violent protests that could result from a lack of service delivery.

Curator Anoosh Rooplal’s timing of the action he instituted on Friday to recover more than R1.5bn from the bank’s largest shareholder, Vele Investments, as well as from the bank’s executives and directors, was done to prevent further “dissipation of assets”.

But the amount of money stolen relative to the bank’s total assets is harder to establish, partly because the bank deliberately misled the regulator and also due to problems with the quality of its audit, which led the bank to withdraw its 2017 financial results.

Rooplal did not rule out seeking damages from the bank’s external auditor, KPMG, and the bank’s internal auditor, PwC, when the forensic report is completed towards the end of August.

According to the bank’s last available annual financial statements to end-March 2016, the bank had total assets of just more than R1bn.

By the end of January 2018, according to data provided by VBS to the Reserve Bank, the bank held total assets of R2bn, meaning it had doubled its balance sheet in the space of two years.

When asked what, if any, part of VBS’s loan book was performing, the curator said that the home loan mortgage book of about R400m was behaving consistent with credit extended under arms-length credit agreements.

The performance of the vehicle finance book was mixed, with the curator noting a deterioration in the credit quality in the months leading up to the intervention by the Reserve Bank.

Based on a balance sheet of about R2bn, and with the curator seeking to recover R1.5bn from the “perpetrators of the fraudulent scheme”, it seems possible that as much as 75% of the bank’s balance sheet has disappeared.

Retail deposits

But there was relief for small depositors, with the Reserve Bank announcing that it has obtained a guarantee of R330m from the Treasury should it fall short in recovering the money owed to them.

The Bank announced last week that retail deposits, which include individuals, burial societies and stokvels, would be guaranteed to a maximum of R100,000 per customer.

This means that 97% of all depositors at the bank will be refunded their entire savings.

Source: Fin24 

FNB Life has identified over R160-million worth of unclaimed policies on its books, it said in a statement on Tuesday.

The bank has, therefore, started an initiative to proactively identify customers who have not submitted claims in the past. It wants to track down nominated beneficiaries, family members or the next of kin.

The bank will do this by proactively accessing and analysing data from the Department of Home affairs to identify potential beneficiaries and pay out what is due to them.

To date, over R5m has been paid across different products to nominated beneficiaries who had no idea that the policies existed before they were traced. The highest claim identified was R3.6m for life cover and R100 000 for funeral cover.

Lee Bromfield, CEO of FNB Life, says it is concerning and unfair that consumers who have spent their hard-earned cash paying insurance premiums have to lose out on claims due to insurers not being able to contact their loved ones or beneficiaries not being aware of the policies.

Here are a few of these reasons:

1. Failure to submit a valid claim

2. Inability to contact beneficiaries due to incomplete, missing, outdated or inaccurate information.

3. Consumers who have multiple policies with different insurers find it challenging to maintain and keep all beneficiaries informed about the policy.

It is also essential that policy-holders actively inform all their beneficiaries and family members whenever they take out cover.

By Hanna Ziady for Business Live

Capitec, the lender that indelibly disrupted SA’s banking sector, entered the insurance market with the launch of Capitec Insure on Monday.

It will dip its toes in the water with a funeral plan underwritten by Sanlam-owned Centriq Life Insurance Company.

“We know what our banking clients are paying to other providers and we are coming in well below the competition with more cover,” Francois Viviers, executive of marketing and communications at Capitec, told Business Day on Monday.

The vast majority of the bank’s clients had funeral policies with other providers. It would target these customers initially before launching marketing campaigns, Viviers said.

Capitec, which obtained its banking licence in 2001, now boasts nearly 10-million customers. About 46% of these are primary banking clients, who not only have loans with the bank but make regular deposits into their Capitec accounts, mainly salaries.

It now has 289,000 active credit cards in issue, launching that product at the beginning of 2017 to target wealthier customers. Its credit card product had a book value of R2bn at the end of February — about 4.2% of Capitec’s total loan book.

The funeral insurance market in SA is reportedly worth more than $500m in annual premiums. The Financial Services Conduct Authority could not confirm this figure at the time of publication.

Funeral insurance was a “good opportunity” for Capitec, as it had been very lucrative for large life insurers such as MMI and Sanlam, said Renier de Bruyn, investment analyst at Sanlam Private Wealth.

“Margins are high, which means Capitec can charge less and still be profitable,” he said.

There were 15-million funeral insurance policies in circulation covering 19-million adults, Viviers said.

“Based on our research, we estimate the average policy in the market to cover a main life, spouse, two children and one extended family member costs between R175 and R295.

“Capitec provides the equivalent cover at approximately R140 in branch and R124 on our banking app,” he said.

Policies start from R25 a month, through the Capitec app and R40 a month when applying in branch.

Funeral cover ranges from R10,000 to R100,000.

The product would be accessible via the Capitec banking app, where customers could change their cover amounts depending on monthly affordability, Viviers said.

The funeral plan featured cover for up to 21 dependants, including the policyholder.

Other features include a doubling of the funeral payout if a life assured died in an accident and a six-month premium waiver if the policyholder died for the remaining life assureds.

In addition, there was a voluntary policy pause for up to six months, with no premiums payable and no cover.

Capitec hoped to launch other insurance products in the long term, Viviers said.

Also on Monday, international short-selling outfit Viceroy Research published a letter containing questions for Capitec’s audit committee.

These relate to alleged changes in Capitec’s provisioning policy and the nature of internal consolidation.

A scathing Viceroy report in February torpedoed the share price and prompted a back-and-forth debate between Capitec and Viceroy.

Capitec CEO Gerrie Fourie said at the time that the Viceroy report was “riddled with inaccuracies”.

The share price did not react to the Viceroy letter on Monday.

By Sipho Masondo for City Press

Fears are mounting that up to 15 municipalities across the country could collapse because they are not likely to recover their R1.5bn investments at VBS Mutual Bank.

Their exposure to VBS was “too large compared to their operating revenue”, according to a Treasury document sent to the affected municipalities last week.

The SA Reserve Bank (Sarb) placed VBS under administration in March, following a liquidity crisis. VBS’s main source of cash was illegal short-term municipal deposits which it used to fund long-term loans to clients.

Senior Treasury officials fear that some of the municipalities – based in Limpopo, North West, Gauteng and Mpumalanga – could collapse. This would force their provincial governments to place them under administration.

The Treasury report reveals that the 15 councils are unlikely to recover their R1.5bn total investment.

“The payout to municipalities is highly uncertain,” the document reads. Its authors point out that Sarb is likely to prioritise retail depositors and not bail municipalities out.

“In line with the mandate of protecting the most vulnerable, the restructuring will focus on the depositors. At this stage, the ordinary depositors will get back almost all their deposits,” reads the document.

Sarb has already approved a restructuring that would benefit rural retail depositors, funeral insurance collectives, stokvels “and other vulnerable groups”.

“There may be little left for municipalities, which deposited illegally. It is a general principle that no bailouts are provided to municipalities,” the Treasury document says.

A senior Treasury executive said there were concerns that because of their “reckless investments” at VBS, some of the municipalities may no longer be financially viable.

“Some of their finances are in tatters, and they may need to be placed under administration,” the executive said.

Salaries in jeopardy

The official cited the example of Giyani, which invested R158m of its R302m operating revenue in VBS.

“How does a municipality without half of its operating revenue survive?” the official said.

The newly established Lim 345 Municipality, in the Thohoyandou area, had invested R122m of its R344m operating revenue in VBS. Greater Tubatse in Sekhukhune had put R210m, or 38%, of its R548m operating revenue in the bank.

Another Treasury executive said this money was part of municipalities’ annual budgets and not extra money that the councils could function without.

“Unfortunately, they have lost all that money and it is only a matter of time before you hear that some of them are not able to pay salaries. I’ve heard that one of them nearly didn’t pay salaries in November last year,” he said.

An executive member of the SA Local Government Association said it was “almost a foregone conclusion that some of these municipalities will crash”.

“We are losing sleep over the issue. The money was strictly for operational issues, not reckless investments,” said the official.

Fictitious deposits, untraceable lending

The Treasury report reveals that about R900m is missing at VBS.

“This money appears to have disappeared due to fictitious deposits and untraced lending. There is evidence of large, unrecoverable loans to directors and related parties. There is some evidence that VBS paid a lawyer a ‘commission’ when municipalities deposited money with the bank. It is not, at this stage, evident if this commission was passed on to municipal managers.”

The report says the bank’s business model was “ill-fated and doomed to fail”.

“VBS made long-term loans, knowing that their primary funding was short-term in nature and lumpy. Hence the business model is almost certainly designed to generate liquidity problems when a few municipalities withdraw their funds to spend on budgeted programmes,” the report reads.

Law was broken

Treasury says VBS actively flouted the law by focusing on municipal deposits, which made up almost 75% of all its deposits. Despite being aware of the restrictions on accepting municipal deposits, the bank continued to accept more. This continued even after it started talking to Treasury about phasing out its past municipal deposits, in order to comply with the Municipal Finance Management Act.

The Mahikeng, Greater Tubatse, Ruth Segomotsi Mompati and Elias Motsoaledi municipalities appear to have been enticed by the high returns the bank promised and disregarded the act.

Curator’s ‘extortionate’ fees

Two VBS senior managers accused the bank’s curator, Anoosh Rooplal, employed by auditing firm SizweNtsalubaGobodo, of charging “exorbitant and extortionate” fees. He sent the bank a bill of R2.6m for three weeks of work.

Sarb appointed Rooplal when it placed VBS under administration in the middle of March.

Rooplal sent the bank his invoice on March 31. The bank paid three days later.

One of the managers said: “If you invoice R2.6m in three weeks, how much will you be paid every month? How much will Anoosh and SizweNtsalubaGobodo be paid by the time the bank is back on its feet? It all looks exorbitant and extortionate.”

Another manager lamented the fact that while depositors could not access their money, the curator was being paid handsomely.

“It simply just doesn’t make any sense to me,” the manager said.

The curator’s spokesperson, Louise Brugman, said Sarb had approved the remuneration and fee structure for the curatorship upfront.

She said that, as per normal governance practice, the curator was required to regularly update Sarb on fees, related activities and the bank’s financial position.

“As further irregularities have been uncovered within the bank, additional experts have been required to assist to restore the bank, all of which is reported and explained to Sarb,” she said.

Gupta bank exits SA

With the state-capture inquiry about to kick off, the Bank of Baroda announced on Monday it was shutting down its South African branches.

The instruction is said to have come from the bank’s headquarters in India.

The bank, which provided banking services to the Gupta family when other banks would not, said its parent company was “rationalising” branches in international markets.

There was speculation at the weekend that it would exit SA.

Baroda said it would stop taking new deposits from March and cease operations altogether at the end of March.

The South African Reserve Bank said the registrar of banks was in talks with Baroda to ensure its orderly withdrawal to protect depositors. The bank had R2.6bn in deposits at the end of December, according to regulatory filings.

Manoj Kumar Jha, the bank’s South African acting CEO, declined to comment.

The latest developments come after the bank became ensnared in state-capture allegations through its association with the Gupta family, its companies and associates.

Baroda faced the possibility of closure arising from a directive the Bank issued after it fined Baroda R10m for breaching sections of the Financial Intelligence Centre Act.

Baroda was named in former public protector Thuli Madonsela’s 2016 report on state capture, which directed President Jacob Zuma to appoint a commission of inquiry to investigate whether any official or organ of state had acted unlawfully, improperly or corruptly by giving financing facilities to companies linked to the Gupta family. This included a R659.5m prepayment that Eskom made to Tegeta Exploration & Resources to acquire the Optimum mine that supplied coal to Eskom.

Baroda is to be investigated for its role in facilitating the transaction and its handling of funds belonging to Optimum’s mine-rehabilitation fund.

After a lengthy legal battle and a ruling by the High Court in Pretoria, Zuma finally appointed Deputy Chief Justice Raymond Zondo in January to head the state-capture inquiry.

The National Prosecuting Authority’s asset-forfeiture unit froze more than R110m in deposits held at Baroda, which it said were proceeds of crime related to the controversial Vrede dairy-farm project in the Free State — meant to empower poor community members.

According to the asset-forfeiture unit, the R110m was part of R220.2m paid by the Free State agriculture department to Estina, a company associated with Atul Gupta, for the project.

Very little of this money was used for its intended purpose. Some funds found their way to Atul Gupta’s niece Vega’s blockbuster wedding at Sun City, while other funds went to vehicle dealers and other entities belonging to the Gupta family.

Attempts to reach Eugene Nel, the curator who was appointed by the court on behalf of the asset-forfeiture unit, were unsuccessful.

By Moyagabo Maake for Business Live

On Tuesday morning, a financial research group called Viceroy released a report looking into the business model and practices of South African lender Capitec. It is damning in the extreme, accusing Capitec of “predatory finance” and massively overstating its performance and value. Capitec will collapse, says Viceroy, unless it is placed under curatorship by the authorities. Here’s what you need to know so far.

What is Capitec?

It’s a South African micro-finance provider which does business mainly with low-income South African consumers. It has been garlanded with awards for its innovative practices and high share prices.

What is Viceroy?

Good question, because until a few months ago few people in South Africa had heard of them. Viceroy is a financial research outfit consisting of three people working between New York and Australia. Viceroy is a deliberately low-profile company with a WordPress website, on which it describes itself as “a group of individuals that see the world differently”.

Viceroy started releasing reports on big companies in 2016, but only attracted South African interest after publishing a report exposing Steinhoff a day after the company admitted accounting irregularities. Now Viceroy has gone in guns blazing for Capitec.

So they’re like a financial version of activist group Anonymous?

That might be pushing it, because there is speculation that Viceroy also shorts stocks on the basis of its information. There is definitely a financial motive to their research as well as an altruistic dimension. Earlier this month, they told Fin24 that they had made donations to South African charities after the Steinhoff exposure, and claimed: “Our ethos is protecting consumers, investors and integrity by making sure all the facts are known.”

What does Viceroy have to say about Capitec?

Nothing flattering. In a 33-page report released on Tuesday morning, Viceroy says that its analysis of Capitec’s reports, study of legal papers and interviews carried out with former Capitec clients and employees reveals a South African enterprise engaging in “predatory finance”.

Capitec is preying upon low-income South Africans, Viceroy suggests, by offering instantly accessible credit via ATMs to people. Customers can be charged interest rates of 155% on a single loan. Viceroy has also obtained affidavits from clients who say that when their first loans with Capitec became too big, Capitec granted them further loans – which clients could not afford – to repay the first loan.

In effect, Viceroy charges that Capitec is acting like a snazzier version of a backstreet loan shark.

Why would Capitec offer loans to people who can’t afford them?

That’s the question which cuts to the heart of the micro-finance industry in South Africa. In Capitec’s case, Viceroy claims that the lender took home more than 20% of its 2017 earnings in loan fees. Viceroy says that Capitec also concealed the extent of its unpaid loans by constantly issuing new loans to refinance the old ones.

Are Viceroy’s claims true?

That remains to be seen. Its Steinhoff report was “hailed as highly professional and accurate”, according to Moneyweb.

The South African Reserve Bank, however, told Fin24 on Tuesday morning that according to the information SARB has at its disposal, Capitec is “solvent, well capitalised and has adequate liquidity”.

What does Capitec have to say for itself?

Its sole public statement on the matter at time of writing had been via social media. Capitec tweeted on Tuesday morning that it had “taken note” of the report. “We are currently in the process of investigating the report in detail and will respond immediately,” it said.

In a hastily sent-off memo to shareholders, however, Capitec was conceding nothing. It described the Viceroy report as “filled with factual errors, material omissions in respect of legal proceedings against Capitec and opinions that are not supported by accurate information”.

By Rebecca Davis for The Daily Maverick

Africa’s largest lender by market value plans to take on Britain’s biggest banks with the takeover of Aldermore Group as growth in its home market stutters.

FirstRand said on Monday it agreed to buy all of Aldermore after winning the backing of the U.K. lender’s board and its largest shareholder. The offer, which values Aldermore at about £1.1bn, will help the Johannesburg-based company diversify away from South Africa, which accounts for about 96% of earnings and where economic growth is slowing to near levels last seen in the 2009 recession.

“There’s plenty of opportunity for a challenger bank to go and keep giving it to the big banks,” Aldermore Chief Executive Officer Phillip Monks said by phone. The company hasn’t received competing offers and will now engage other shareholders after receiving irrevocable undertakings from funds advised by AnaCap Financial Partners, he said. AnaCap holds more than 25% of its stock.

Fast-growing Aldermore is among a group of U.K. banks seeking to challenge the dominance of the nation’s four biggest lenders, which control as much as 80% of the market, by offering faster lending decisions and more personalised customer service. FirstRand is also facing increased competition from smaller banks and financial-technology start ups at home.

FirstRand will create a new division for its UK operations that will be headed by Monks and include both Aldermore and FirstRand’s auto-finance business MotoNovo, the CEO said. It will now “need to sit down” with MotoNovo and “think about the opportunities that we can work out together,” Monks said.

Premium justified

FirstRand is offering £3.13 a share for Aldermore, 22% more than Aldermore’s closing price on October 12. Aldermore rose 2.5% to £3.10 by 14:45 in London on Monday, extending gains since its March 2015 initial public offering to 61%. FirstRand climbed 1.3% to R53.09 for a market value of R298bn.

The premium is justified because “we can accelerate our strategy, the fact that we get access to a banking license with a very well-regarded deposit franchise, the fact that we can get access to a great management team with a track record of delivery,” and the size of the transaction relative to FirstRand’s market value, FirstRand Deputy CEO Alan Pullinger said by phone.

The deal won’t impact the outlook provided when FirstRand released full-year earnings in September, he said, when the lender said it expects return on equity, a measure of profit, to be in the upper end of its 18% to 22% target. “The guidance we’ve given to the market around earnings growth, return profile and dividends will remain intact.”

Surplus capital

The acquisition comes as FirstRand seeks to build offshore funding so it doesn’t need to rely on the South African government’s credit rating. The nation’s local-currency debt is at risk of being downgraded to junk by the end of the year because of political wrangling ahead of the ruling party’s conference to elect a successor to President Jacob Zuma.

“We can fund this entire transaction with existing cash resources,” Pullinger said. “We’ve been building up a lot of surplus capital. We continue to build up excess capital and we think we’ll continue to generate surplus capital post this transaction.”

The lender isn’t allowing concerns around Britain’s decision to leave the European Union to halt its expansion strategy, he said, given that it has become accustomed to operating nine subsidiaries in riskier sub-Saharan African markets. “All of those markets have also got some pretty heavy challenges and some scary political stuff going on,” he said. “We don’t for a moment minimize the concerns around Brexit, but it is a relative issue for us.”

The purchase may limit FirstRand’s ability to make large acquisitions in the rest of Africa, Patrice Rassou, the head of equities at Sanlam Investment Management in Cape Town, said by email. Combining Aldermore and MotoNovo would create a more sustainable business as the “two are complementary,” he said.

‘Glorious’ run

FirstRand needs approval from 75% of Aldermore’s shareholders for the deal to go through, FirstRand spokeswoman Sam Moss said in a text message.

“Aldermore’s pretty glorious two-and-half years as an independently listed company appears all but over,” Ian Gordon, the head of banks research at Investec Bank Plc in London, said in a note. “We assume completion on the agreed terms within four months. We continue to anticipate little likelihood of any counter-bid or ‘sweetener’ to the existing offer.”

Aldermore released an earnings update on Monday that showed an improvement in its tangible net asset value to £1.76 from £1.525 at the end of 2016. That values FirstRand’s offer at 1.78 times, “which we see as reasonable, but hardly over-generous”, Investec’s Gordon said.

By Donal Griffin and Renee Bonorchis for Fin24

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