Absa ups Blue stake

Johannesburg - Financial services group Absa has increased its "accidental" stake in micro-lender Blue Financial Services from 16% to 21%.

Blue has informed shareholders in a statement that Absa has increased its stake by 5 percentage points. The banking giant has also extended Blue a R120m lending facility.

Absa acquired its original stake in Blue after the bank underwrote single stock futures transactions in Blue's shares, brokered by financial services firm Cortex Securities. Absa forced Cortex into default when its clients were unable to meet the margin calls, resulting in Absa taking delivery of the stake.

The group has similarly taken stakes in the listed companies Pinnacle Point, ConvergeNet and Sekunjalo.

Blue is a micro-lender in 13 African countries, including South Africa, Zambia and Tanzania.

Blue CEO Dave van Niekerk said Absa had recently conducted a due diligence report of Blue.

Having a major shareholder like Absa gave him a lot of comfort, he added, as it would assist with funding.

"I'm trying to build a company with a good footprint and the strategy is starting to pay off.

"We have raised a lot of money offshore and it is a positive sign for us that we can now raise money from a local group like Absa."

Blue's operating income jumped by 161% to R736m and earnings rose by 92% to R118m in the year to end-February.

Fin24.com previously speculated that a tie up between Absa and Blue could be on the cards as it would allow Absa access to the micro-lending space.

By midday, Blue's shares were trading down 1c at 147c/share. Absa's shares were down 95c to 10 125c.

- Fin24.com