South Africa’s African Bank will buy lender Ubank, potentially adding as many as 4.7 million retail customers and expanding its operations as it seeks to list on Johannesburg’s main stock exchange.
The R80 million ($4.8 million) cash deal comes just three months after African Bank agreed to buy Grindrod Bank for R1.5 billion to expand its business-lending operations. Ubank is one of the smallest locally registered retail lenders in South Africa and many of its customers live outside of large urban centers.
“African Bank has been working to diversify funding sources and has added significant retail deposits over the last few years,” the lender said in a statement about its purchase of Ubank on Friday. “The addition of Ubank’s deposit base would accelerate this effort.
African Bank used to be the country’s biggest provider of unsecured loans to the low-income market, but went into administration in 2014 after bad debts rose and the market shunned its bond sales, which was its only means of raising capital at that time.
The central bank stepped in and still holds a 50% stake of African Bank that it plans to dispose of through an initial public offering.
Chief executive officer Kennedy Bungane said in May a listing on Johannesburg’s main exchange may not happen in the next year because the lender has yet to achieve the diversification, scale and sustainability needed to make it a compelling proposition.
African Bank has also been touted as a potential candidate for a new state bank, although Finance Minister Enoch Godongwana has said the government has no money for such a venture.
Ubank has had financial troubles of its own. It was partly managed by mine workers before it was placed under administration in May due to concerns over corporate governance, internal control weaknesses and insufficient capital. It was created more than four decades ago to serve as a savings fund for mineworkers, but converted to being a commercial bank in the early 1990s.