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Absa sues Nedbank over Pinnacle trading

Jan 12 2012 16:05 Reuters

Company Data

Absa Group Limited [JSE : ASA]

Last traded R150.00
Change R0.00
% Change 0.00%
Cumulative volume 1.30m
Market cap R107.73bn

Last Updated: 25/05/2012 at 19:32. Prices are delayed by 15 minutes. Source: McGregor BFA

 

Nedbank Group Ltd [JSE : NED]

Last traded R168.34
Change R-0.80
% Change -0.47%
Cumulative volume 299,281
Market cap R85.43bn

Last Updated: 25/05/2012 at 19:32. Prices are delayed by 15 minutes. Source: McGregor BFA

 

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Johannesburg -  Absa Group [JSE:ASA] is suing domestic rival Nedbank Group [JSE:NED] for about R773m to recoup losses relating to the trading of single stock futures (SSFs) in property firm Pinnacle Point, court papers showed on Wednesday.

Absa, majority owned by Barclays, was forced in 2009 to buy stakes in four Johannesburg-listed firms - including Pinnacle - for R1.4bn after clients defaulted on payments related to SSF contracts.

An SSF is a leveraged contract to buy shares in a company at a set price in future. When stock prices fall, investors may struggle to meet widening margin payments.

Nedbank bought shares in Pinnacle (then called Acc-Ross Holdings) and sold futures contracts based on these to Cortex Derivative Brokers, which had named Absa as underwriter.

Absa said in court papers Nedbank must have known Cortex would default on margin payments related to the SSFs but chose to overlook its creditworthiness.

"We cannot be held responsible for other parties' losses suffered as a result of a decline in the share price of Pinnacle Point. We will defend ourselves," said Brian Kennedy, managing director of Nedbank Capital.

The Johannesburg Stock Exchange is the biggest SSF market in the world by volume, although in value terms it is much smaller than several others including India's national stock exchange and the Eurex derivatives exchange.

 
 
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