Financial Services Correspondent
SANLAM has made its long-awaited decision on Gensec Bank by opting to shut down parts of the bank's business in a process likely to lead to Gensec handing back its banking licence to the Reserve Bank.
Gensec has struggled to establish its own identity in the Sanlam stable as the South African life assurance giant also owns 23% of big four banking group Absa.
While mulling over what to do with its two bank assets, Sanlam contemplated selling Gensec to Absa to consolidate these interests, but this prospect was finally quashed yesterday.
Both Absa and Sanlam "decided that it would not be in either's best interest to pursue an outright sale of Gensec".
Rather than selling Gensec entirely, Sanlam will split the bank, keeping the part of Gensec it needs while either selling or allowing the parts it does not need to run to a close.
Gensec's long-term investment and investment banking business will run to a close which suggests it will no longer need a banking licence.
Sanlam CEO Johan van Zyl said the decision on Gensec's future "should have been taken long ago".
The life assurer was faced with a quandary as it could have poured capital into Gensec to bring it into the major league but this would have pitted it against Absa.
Van Zyl said the new plan "makes complete sense" as Sanlam will be able to rid itself of the Gensec business that requires large amounts of capital to operate while keeping the less-expensive core parts that Sanlam itself needs.
Sanlam's remaining Gensec operation will be rebranded as Sanlam Capital Markets and, after the restructuring, it is expected to yield a profit of R100m a year.
"This way, we cut down on our risk and free up the capital to invest in other ventures where we get better returns," Van Zyl said.
He took the Sanlam reins in March after Leon Vermaak left under controversial circumstances. Since assuming the top post, Van Zyl has announced a "back to basics" plan designed to put the sparkle back into a business that was losing market share and was labouring under the uncertainty of what it intended to do with its banking assets.
Now, while Sanlam and Absa focus on finding distribution channels to sell each other's products, it may have found an answer to its Gensec headache.
As one analyst said, yesterday's decision on Gensec's future will bring clarity to Sanlam's eventual game plan.
Aug 27 2003 07:22:16:000AM Rob Rose Business Day 1st Edition
Publisher: Business Day
Source: Business Day
Sanlam to close down parts of Gensec Bank.
Posted On Wednesday, 27 August 2003 02:00 Published by eProperty News
SANLAM has made its long-awaited decision on Gensec Bank by opting to shut down parts of the bank's business in a process likely to lead to Gensec handing back its banking licence to the Reserve Bank.
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