African Bank Top Investor Seeks to Calm Clients Amid Losses

Aug 08, 2014 11:34 am ET

(Updates share prices in fifth paragraph.)

Aug. 8 (Bloomberg) -- Coronation Fund Managers Ltd., the biggest shareholder in African Bank Investments Ltd., said a plunge of more than 90 percent in the lender’s stock in three days is immaterial to investment portfolios.

“The exposure to African Bank is not material in any of our client funds,” Pieter Koekemoer, head of personal investments at Cape Town-based Coronation, which oversees the equivalent of $54 billion, said in a note to clients yesterday. “Equity exposure is very small and we have virtually no exposure to African Bank debt or money market instruments.”

The market value of African Bank, South Africa’s largest provider of unsecured loans, dropped by 9.87 billion rand ($924 million) since the Johannesburg-based company said Aug. 6 that its founder quit in the face of record losses. That shaved 2.17 billion rand off the value of Coronation’s 22 percent stake, according to data compiled by Bloomberg.

The lender accounts for 0.62 percent of Coronation’s Top 20 fund, which has 23 billion rand in assets, and 0.37 percent of Coronation’s Balanced Plus fund with 64 billion rand in assets, according to the Cape Town-based money manager. African Bank Chief Executive Officer Leon Kirkinis, 54, resigned as the company, known as Abil, announced it will post a fiscal full- year loss of as much as 7.6 billion rand and would need to raise more than 8.5 billion rand to bolster capital levels, following a rights offer in December.

Abil dropped 38 percent to 31 cents by the close in Johannesburg for a market value of 465.3 million rand. The securities slid 81 percent yesterday and 61 percent the previous day. Coronation fell for a fourth day, declining 0.5 percent to 93 rand.

Help Needed

Coronation won’t comment beyond the note to clients, spokeswoman Louise Pelser said by phone today. The Public Investment Corp., Abil’s second-largest shareholder with a 12 percent stake, has given the lender a week to complete a turn- around plan before deciding whether it will provide more support, Johannesburg-based Business Day reported, citing Chief Investment Officer Daniel Matjila.

“If the top three shareholders get together and will put in the money, calculations show that Abil will survive,” Kokkie Kooyman, the head of Cape Town-based Sanlam Global Investments, which has $900 million under management, said yesterday by phone. The South African Reserve Bank is in talks with Abil, Hlengani Mathebula, a SARB spokesman, said yesterday by phone from Pretoria, without giving more details. Mathebula didn’t immediately respond to two e-mailed requests for comment.

Abil’s share price has plummeted 99 percent since Coronation started increasing its stake in the business from 4.9 percent two years ago.

--With assistance from Vernon Wessels in Johannesburg.