Absa rides wave from Bankorp probe leak

DAMPER: PW Botha SHARES in Barclays Africa Group closed unscathed on Friday after reports that the public protector was investigating whether the bank had received undue state support in the apartheid era when it bought Bankorp and whether it should repay the money.

Barclays Africa, or Absa, bought the struggling Bankorp, at one time the country’s fourth-largest, in 1992 from Sanlam for R1.23-billion.

The Reserve Bank had helped to keep the bank, which housed wellknown brands such as Trust Bank, going since 1985 when a banking crisis was triggered by former president PW Botha’s Rubicon speech. The speech put a damper on expectations of major political reforms, prompting foreign lenders not to roll over loans.

In 1992, South Africa suffered three bank collapses. The central bank continued to provide assistance to Bankorp until 1995, when Absa or Barclays Africa assumed ownership.

The amount in dispute was rooted in three Reserve Bank loans of R300million, R700-million and R500-million to Bankorp. In 1995 Absa paid back the principal amount of R1.5-billion owed by Bankorp to the Reserve Bank.

However, the preliminary report from the public protector’s office, leaked to the Mail & Guardian, which reported on it on Friday, contends that the bank had not fulfilled its obligations and was still liable to pay the interest on the loan, amounting to R1.125-billion.

According to the document, the bank faces the prospect of paying back R2.25-billion — the value of the initial interest charged plus further interest. The interest charged on the outstanding R1.125-billion cannot exceed the capital value of the loan.

Absa defended its position in a statement, saying that it had acquired Bankorp at “fair value” and that all “obligations pertaining to the Reserve Bank’s assistance were discharged in full by October 1995”.

It said it would submit a response in order to “correct several factual and legal inaccuracies that are contained in the provisional report”. The deadline for submissions is February 28.

Former Reserve Bank governor Tito Mboweni commissioned a report by the Davis panel of experts in 2001. The report claimed that Absa had paid back R1.5-billion that was outstanding when it had bought Bankorp.

Reserve Bank spokesman Jabulani Sikhakhane said the bank had received the provisional report on December 20 and would “study its findings and recommendations. We’ll respond to the public protector within the timetable set by the office.”

Sanlam said it was inappropriate to comment on the preliminary report at this stage.

The leaking of the report weakened Barclays Africa’s shares by more than 2% during intraday trade, before the stock recovered to end slightly firmer at R171.10.

Brad Preston, chief investment officer at Mergence, said the claims in the report may have political implications, but it was unlikely that they would have a material effect on Absa’s performance.

“If you look at Absa’s market cap, it’s almost R145-billion. This claim is R2.25-billion, so that’s 1.5% of the market capital,” said Preston.

He added that, depending on the outcomes, the effect on Absa would be “more complex if Absa suddenly had to pay out R2.25-billion in cash, because there are other implications”.

While Absa has time to present its case, Preston said it might take a while for the matter to be concluded. “In any case, these types of things are delayed and it’s really not a large enough amount to be concerned about.”