The SA Reserve Bank, which last Wednesday said it has been closely monitoring developments at embattled Abil, yesterday announced a rescue plan for the bank. Abil's demise is typical for a failed bank – the slow decay as confidence wanes followed by a sudden crash as it runs out of options. The classical tipping point, to use Malcolm Gladwell's parlance, happened last Wednesday when long-time CEO Leon Kirkinis left the bank with immediate effect. As we commented at the time, Abil chairman Mutle Mogase and his directorate were faced with Hobson's Choice – shareholders called on to inject more capital, demanded a change in management; but the directors believed Kirkinis was the only person there with any earthly chance of turning it around. With him gone, the confidence barometer swung from the gradually to suddenly stage. The largest shareholders are Coronation (20%) and the PIC (15%). They were not alone in their support – in July, Momentum increased its shareholding to 5.5% a month after Sanlam raised its stake to 5%. But the biggest exposure to the bank is through corporate bonds. With the SARB having stepped in, bondholders are no longer likely to lose all their capital, and will be relived the haircut now looks like being limited to 10% (still R4.5bn in total however). Shareholders won't be completely out of pocket as the "good" part of Abil is likely to be re-listed on the JSE – but with other private sector banks, including Abil's direct competitor Capitec providing the fresh equity, existing shareholders are likely to be diluted to a fraction of Friday's holdings. To read Gill Marcus's full address or to download it in PDF format, click here. – AH .From Agence France-Presse.South Africa's central bank stepped in to rescue embattled lender African Bank Investments Limited (Abil) on Sunday after its share price plummeted and it said it needed R8.5bn ($800 million) to continue operating..The bank has been put under curatorship — or administration — and will receive a R10bn capital injection and protection for creditors, Reserve Bank governor Gill Marcus (right) told a news conference..Lenders including Barclays Africa, FirstRand, Standard Bank, Nedbank, Capitec and Investec and fund administrator the Public Investment Corporation (PIC) have agreed to underwrite the capital raising, Marcus added..The bank, which has been plagued by bad debts, had been put under curatorship to give it time "to come up with rescue plan," she said, adding that the bank's board had not objected to the move to administration and would cooperate..The CEO and founder of Abil, Leon Kirkinis, resigned last Wednesday, and on Friday the bank's share price collapsed from 6.88 rand to 31 cents, wiping out more than 95 percent of its value in three days. It had already plummeted from 30 rand a share in March last year..In a six-month period to March 2014 the bank posted a headline loss of 3.1 billion rand, the governor said..Marcus said retail depositors represent less than one percent of Abil's creditors and she assured customers that their savings would be protected.."We are therefore able to make an unequivocal commitment to all existing retail depositors that their money is safe, and that they can continue with African Bank without fear that their deposits will be frozen or lost," she said.."They will have full access to their money in the ordinary course of business.".Abil is mainly a small-loan bank for low-income earners and has been hit by rising inflation and unemployment.
