African Bank and Standard Bank: A tale of two banks and the perils of succession…

A general view of African Bank at Northgate Shopping Centre on 29 October 2020 in Johannesburg. Picture: Gallo Images/Sharon Seretlo Charles Dickens penned his seminal introduction toA Tale of Two Citiesalmost 170 years ago, and this month it resonated with the fate of two banks. In a country where the banking sector is defined by extensive regulations and high propensity for profits, and where succession games are scrutinised deeply, the fates of African Bank and Standard Bank represent the great contrasts that Dickens articulated.

On Friday 6 March, African Bank suddenly announced that its CEO – Kennedy Bungane – had stepped down with immediate effect. The reasons for his departure remain opaque but the bank spared us the manufactured story that others have gone for in referring to unplanned stepdowns as early retirement or a desire to pursue new endeavours. Such reasons would have fallen short of all dimensions of plausibility due to the bank’s own prior utterances.

Since Bungane’s appointment, the dual mission of the bank has been diversification away from the monolithic lending model (which once drove it into the doldrums of curatorship) and embarking on a journey of disentangling itself from the remnants of those dark days. In the aftermath of its curatorship, the bank ended up with a unique ownership model where the regulator and competitors owned African Bank. The need to preserve the stability of the industry was the premise advanced for this model.

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Since then, the regulator has been keen to end the entanglement – and while exit steps have been initiated before, the sweet spot of a deal that appeases current and prospective owners has not yet been found. In between, the bank embarked on a growth strategy that was driven by internal efficiencies and the old albatross of acquisitions. The problem with such institutions is that internal efficiencies can only take you so far in a market whose competitive dynamics often come down to the marginal difference between cost ratios, credit losses and equity returns.

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