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In recent years South African banks turned to unsecuredcredit - such as personal loans - to offset
weak demandelsewhere. But most commercial banks have reined that lending inas weaker economy
prompted more customers to default.
There was no sign of panic at an Abil branch in the workingclass Johannesburg neighbourhood of
Randburg at midday onThursday. There was even a small trickle of customers cominginto the branch
to fill out new loan applications.
"Everything is fine, it's business as usual," said themanager, who declined to give her name.
Posters in the windows of the branch advertised mobile phonedeals with new loans. "Credit that
works for you - apply today,"one read.
Godfrey Mashele, a 38-year-old employee of a mobile servicesfirm, said he intended to keep paying
off his 3,000 rand creditcard debt regardless of the news.
"I've heard they've lost money with their customers notpaying. But I'll be carrying on paying down
my debt, it's on amonthly debit order," he said.
BUSINESS RESCUE
Abil's furniture retailing arm said on Thursday it hadapplied from temporary protection from
creditors, or "voluntarybusiness rescue" under South Africa's Companies Act.
The process allows a company that still has commercialprospects an opportunity to potentially
rehabilitate itself,said Brandon Irsigler, a director at law firm Norton RoseFulbright.
"This is a middle path between debtors not being able torecover their money and forcing an
otherwise viable businessinto liquidation to the detriment of everybody," he said.
Leon Kirkinis, who resigned as Abil's chief executive onWednesday, built the bank into one of South
Africa's best knownlenders by targeting low-income borrowers with expensive credit- a previously
untapped market of people who had beentraditionally ignored by banks during the apartheid era
thatended in 1994.
But critics said those lending practices were unsustainable.
"The question now is how much the loan book is really worthand if that is enough collateral for
equity holders after thebond obligations have been fulfilled." said Nic Norman-Smith,chief
investment officer at Lentus Asset Management inJohannesburg.
"Based on the current equity valuation, the market is sayingthat there will be very little - if anything
- left."
Abil said on Wednesday it would cleave off its bad loans inan attempt to create a ring-fenced "good
bank".
Its bad loans comprise nearly a third of its 60.1 billionrand book, while it had 47 billion rand worth
of bonds andlong-term debt on its balance sheet as of the end of March.
The Johannesburg Stock Exchange said it saw no reason tohalt trading of Abil's shares "at this
moment". ($1 = 10.7310 South African Rand) (Aditional reporting by Wendell Roelf in Cape Town
and StellaMapenzauswa in Johannesburg; Editing by Sophie Walker)
http://www.reuters.com/article/safrica-abil-idUSL6N0QD36120140807