FNB pays out R295 million amid state-owned ‘bank’ collapse

FNB has processed R295 million worth of payouts for 3,600 Ithala clients after it was appointed by the National Treasury to help depositors access their money from 8 December.

This comes after the bank, which is owned and operated by the KwaZulu-Natal provincial government, has been mired in compliance issues and faces liquidation. 

Ithala is not a bank, holding no banking licence. The institution operated under an exemption from the Finance Minister that enabled it to receive deposits.

After the Prudential Authority applied for Ithala’s liquidation, the National Treasury stepped in to guarantee depositor funds. 

As part of this process, it appointed FNB to ensure that depositors could access their funds while Ithala’s operations are halted by the Prudential Authority. 

On the first day of its appointment to payout depositors, FNB paid 1,586 customers, disbursing deposits worth R75 million, including 29 customers via eWallet for a combined value of R15,500.

To further assist Ithala customers, FNB introduced a minimum payment top-up for amounts below R20, ensuring that beneficiaries can withdraw and utilise funds seamlessly.

“Our priority is to ensure that beneficiaries receive funds quickly, securely, and with minimal friction,” Jacqui O’Sullivan, FNB Corporate Affairs Executive, said. 

“The R20 minimum top-up removes a practical barrier for low-value disbursements, while our multi-channel approach to payouts supports broad accessibility.”

“Our branch staff members continue to work tirelessly to make this process as simple as possible for customers to obtain their funds, leading into the festive season.”

Remaining customers with outstanding payouts will continue to receive SMS notifications with their scheduled branch visit dates. 

Payouts can be accessed at any FNB branch nationwide, with measures in place to manage queues and minimise waiting times.

As the largest concentration of Ithala customers is in KwaZulu-Natal, FNB is extending its operating hours in the province to best support those affected customers. 

From 8 December to 31 December 2025, FNB KZN branches will be open from 07:30 to 17:00.

Ithala’s deep problems

Ithala has failed to regularise its deposit-taking activities and comply with the banking regulations required to hold a licence. 

The National Treasury repeatedly granted it extensions to give it time to comply, which it has failed to do so due to severe compliance issues. 

The Prudential Authority applied for its liquidation earlier this year to try to recover funds for its depositors.

Ithala has had significant issues in complying with South African banking regulations, with mismanagement resulting in the Prudential Authority applying for its liquidation. 

Following the appointment of a Repayment Administrator to secure funds for the depositors, independent forensic accountants assessed Ithala’s liquidity and solvency. 

They found that the ‘bank’ was technically insolvent as its liabilities exceeded its assets. Specifically, Ithala’s liabilities amount to R2.79 billion, while its total assets stand at R2.35 billion, resulting in a shortfall of R441.63 million.

The Prudential Authority had previously reported that, between 31 March 2008 and 31 March 2024, Ithala incurred losses totalling R520 million.

Denker Capital’s Kokkie Kooyman, a renowned banking sector analyst, said the potential liquidation of Ithala came about after three years of mismanagement and a lack of urgency in addressing compliance issues.

Kooyman said these challenges cannot be fixed overnight, as it would require a complete cultural shift within the company to become good custodians of depositor funds.

Chief among Ithala’s issues is the quality of the bank’s loan book, which may show that a significant portion of its loans cannot be paid back. 

Another key issue is Ithala’s operating systems, which may not be adequate for a company that acts as a bank. 

This is a direct result of the company’s management, which has resulted in clients losing trust in the institution and minimal action being taken to do what is necessary to meet regulatory requirements. 

“The problem has been growing for around three years, which is when the Prudential Authority first warned about Ithala’s operations,” Kooyman said. 

The regulatory body has repeatedly given Ithala grace by extending its exemption, but has let the final notice lapse in December 2023. 

Once it lost this exemption, clients would naturally lose trust in the institution, as it was the final chance for the company to regularise its deposit-taking activities following a series of non-compliance issues.

“The shareholders failed to understand the extent of the problem and the risk of a shutdown from the Prudential Authority,” Kooyman said. 

“The Reserve Bank cannot afford a run on a bank and a loss of trust in the banking system.” 

“The problem with a bank is that once the public loses trust in the bank, the party that stands to lose the most are depositors, so they start withdrawing their money. This creates a run on the bank.”

“That is basically unstoppable and is a really nasty phenomenon that has resulted in many banks falling over.”