For the transcript, video and audio of Alec Hogg’s interviews on the Abil disaster click on the names below:
* Veteran stockbroker David Shapiro
* Sanlam’s head of equity Patrice Rassou
JOHANNESBURG (Reuters) – Shares of South Africa’s African Bank Investments plunged for a second day on Thursday on widening worries the struggling mass-market lender may not be able to plug a $790 million hole in its balance sheet.
Abil, as the bank is called, plunged 65 percent to trade below one rand for the first time since 1996, valuing the company at around $140 million. That followed a 60 percent drop on Wednesday. By lunchtime the price had halved again to under 40c.
Worth more than $2 billion at its height, Abil’s precipitous decline has wiped out 10 billion rand ($930 million) in shareholder value in two days.
The bank’s chief executive quit on Wednesday as the bank said it needed to raise 8.5 billion rand in new capital after flagging a massive annual loss.
But investors are concerned it might not be able to raise the funds, given that the amount it is seeking is several times its current market capitalisation.
“If the shareholders don’t support it then African Bank won’t survive,” Wayne McCurrie, a portfolio manager at Momentum Wealth, told Reuters on Wednesday.
Barclays on Thursday cut its target price on the bank to 1.83 rand from 5.41 rand, keeping its “underweight” rating on the stock.
“An equity issue will be significantly dilutive which will put downward pressure on our target price,” the bank said in a note to clients.
