Tag: bank

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

Eskom to get R20bn boost from Chinese bank

Eskom will sign a $1.5bn (R19.78bn) loan agreement with China Development Bank on Thursday, as the state-owned utility powers ahead with its funding requirements for 2017.

Last week, new acting Eskom CEO Johnny Dladla revealed that Eskom had secured 77% of its funding requirements for the 2017/18 financial year.

He said that for the 2016/17 financial year, Eskom increased its borrowings by over R60bn.

“We remain resolute that we will fully execute the required funding for the year, albeit under challenging market conditions,” Dladla said in a statement last week.

“Our liquidity levels remain healthy and Eskom’s financial profile continues to improve and stabilise.

“Backed by the availability of the government guarantees and the stable financial profile, we do not foresee significant impediments in the execution of the remainder of the FY17/18 funding requirement,” said Dladla.

Eskom is expected to use R43.6bn of its guarantee in 2016/17 and R22bn annually over the medium term, Treasury said in its 2017 Budget Review. Eskom has a R350bn guarantee for the 2016/17 year, with an exposure of R218.2bn.

“Gross foreign borrowings are expected to account for the majority of total funding over the medium term, largely as a result of Eskom’s efforts to obtain more developmental funding from multilateral lenders,” Treasury said in the Budget Review.

The borrowings come despite the power utility being downgraded by rating agencies this year, after Moody’s, S&P and Fitch cut South Africa’s sovereign credit ratings.

By Matthew le Cordeur for News24


Those of us who don’t rent bank safety deposit boxes for our valuables probably imagine the set-up to involve fingerprint-accessed vault-like doors and a cobweb of alarmed beams, as in the movies.

It wasn’t quite like that, said one of the victims of the December 18 First National Bank Randburg branch heist in which 360 boxes were stolen.

“Zai” of Randburg, who did not want to be named, happened to be at the bank yesterday when most of the boxes were returned to the branch by what appeared to be a private security company.

Police found the empty boxes dumped near FNB Stadium in Soweto two days after the heist.

All the valuables, including watches, Krugerrands, and jewellery passed down generations were gone. Only documents such as title deeds were left behind.

Zai’s family had rented the box since about 2004, she said, and at the time of the theft were renting it at R120 a month.

“Ironically, it was quite a big deal for us to access our boxes,” said Zai, who last did so in October.

“You had to make an appointment at least 24 hours in advance.

“Someone would meet you and take you into a room, and lock the door behind you. I’d have to produce my ID, then he’d go into another room, a vault, where the boxes were kept, lock that door behind him and then pass my box to me through a slot in the wall.

“I never saw any of the other boxes. I opened my box with two keys, in my possession, and then I’d be left alone to do what I needed to do, and then I’d phone to say that I was finished, so they could take the box back into the vault.

“It seemed very safe and professional,” she said.

In early December Zai’s husband asked her to collect their six expensive watches from the box to have them serviced.

“But I was too busy and now they are all gone,” she said.

FNB’s safety deposit contract states the bank will not be legally responsible “under any circumstances for any loss or damage that may occur to the contents” and officials have said they had no way of knowing what was in the stolen boxes and urged clients to insure the contents of the boxes.

By Wendy Knowler for Timeslive

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