Nedbank downgrades Ecobank stocks

February 28, 2017, 6:41 am

South Africa’s Nedbank booked a $293 million writedown on the value of its stake in sub-Saharan lender Ecobank on Tuesday and reported its slowest growth in annual profit since 2009.


Ecobank Transnational Inc’s operations in central and west Africa are exposed to some economies that have been pressured by the commodity price slide and unfavourable currency swings since Nedbank bought a 20 percent stake for $500 million in 2014.

The writedown reduces Ecobank’s value on Nedbank’s books to 4 billion rand ($308 million) from 7.8 billion rand, the South African lender said in a statement.

Nedbank said, however, that Ecobank remained vital to its expansion elsewhere on the African continent, where Ecobank has operations in nearly 40 countries outside its home market.

“It’s obvious that we would be disappointed with the performance of our Ecobank investment to date,” Nedbank Chief Executive Mike Brown told reporters.

“But we still, however, remain optimistic on the long-term growth prospects in the rest of Africa.”

Brown forecast another tough year for Ecobank, which makes the bulk of its earnings in Nigeria, before improving in 2018 and beyond. Nigeria, Africa’s biggest economy, has been hit by a currency crisis and its first recession in 25 years following the slide in oil prices since the middle of 2014.

Shares in Nedbank were little changed at 244 rand at 1300 GMT, more than 40 percent below where they should trade based on the most likely earnings trajectory, according to Thomson Reuters StarMine intrinsic valuation model.

Nedbank, a subsidiary of Anglo-South African conglomerate Old Mutual, said its diluted headline earnings per share (EPS) rose 4.8 percent to 2,350 cents in 2016, the slowest pace of growth since 2009 when its EPS fell by nearly a third.

Headline EPS is the main measure of profit in South Africa as it strips out certain one-off items.

Nedbank also said its results were affected by slack demand for loans as slowing economic growth and higher interest rates hit consumption and investment spending across Africa.

Brown forecast at least 7 percent growth in 2017 annual headline EPS, saying a peak in interest rate cycle in South Africa would lift demand or loans.

Old Mutual is in the middle of an overhaul in which it will carve itself into four parts and cut its 54 percent stake in Nedbank to a minority holding to simplify its structure.

Nedbank competes with Standard Bank, FirstRand, Barclays Africa and Capitec.


Source: nan 

Follow us on Twitter @theglobengr




Like this story? Get on the list for's FREE!.

Related News


High Court Barred The Government From Arresting Nation Media Group (NMG) Journalists Linus Kaikai

High Court on Friday barred the Government from arresting Nation Media Group (NMG) journalists Linus Kaikai, Larry Madowo and Ken Mijungu. Justic....

Raila Odinga Has Taken ‘Oath’As The President Of The Republic Of Kenya.

After days of anxiety and a postponement in December 12, 2017, Raila Odinga has taken ‘oath’ as the President of the Republic of Kenya.


Tuface, Annie in Benue To Support Flood Victims

The popular musician, Innocent Idibia, popularly known as TuFace, has arrived at the camp for internally displaced persons in Makurdi, the Benue St....

UEFA Extends Kit Assistance Scheme to 2022

UEFA has extended its successful Kit Assistance Scheme, which supports Europe’s smaller national associations....

We're ready to prove Judiciary wrong, says Uhuru, asks IEBC to set dates

President Uhuru Kenyatta has asked the electoral agency to announce the dates for the repeat presidential elections as soon as possible.