Johannesburg - The CEO of
Nedbank Group [JSE:NED] says he did not believe HSBC found anything negative when doing its due diligence on the South African bank.
"We don't believe they found anything digging around any of the filing cabinets,"
Mike Brown, Nedbank's CEO, told Talk Radio 702 on Friday.
HSBC ended talks to acquire a majority stake of the South African bank on Friday, with some analysts saying the European bank may have been concerned about the quality of Nedbank's loans.
Brown said the collapse of talks was "a disappointment".
HSBC's decision to end talks to buy an $8bn majority stake in Nedcor leaves it without a clear Africa strategy and handed an opportunity to rival Standard Chartered.
HSBC had been in exclusive talks with
Old Mutual [JSE:OML] to buy up to 70% of Nedbank, South Africa's fourth-largest bank, under an eight-week period of exclusivity due to end on Monday.
Both HSBC and Old Mutual said in statements on Friday the talks had ended, without saying why negotiations broke down. Old Mutual said that, as far it was aware, it was not due to adverse findings during due diligence.
The deal may have been complicated by HSBC's recent change in its chairperson and chief executive following a boardroom power struggle. Tougher rules on bank capital and potential resistance from South African officials might have also hurt the negotiations, analysts said.
Potential loan lossesNedbank is also struggling with high levels of bad debts at its money-losing retail unit.
"The talks were undertaken on the premise that it would have given it optionality for growth in Africa," said Andrew Lim, analyst at Matrix in London.
"However, that was under the intentions of (outgoing CEO) Michael Geoghegan, and with the new management in place they might have thought that following through on the acquisition was too risky, given the potential loan losses and lack of certainty on the loan book."
Nedbank shares tumbled 6.1% in Johannesburg, while Old Mutual finished down nearly 5% in London. Shares in HSBC fell 1.4%, and StanChart added 0.6%.
The acquisition would have given HSBC, which has a limited presence in Africa, a gateway into the fast-growing continent, where other big banks are targeting its increasing trade with Asia. HSBC has said it needs a stronger presence on the resource-rich continent to live up to its claim to be "the world's local bank".
Standard Chartered could now get another chance at Nedbank, analysts said. The emerging-markets lender was previously in talks to take a stake in Nedbank, sources have said.
StanChart on Wednesday announced a $5.3bn rights issue, but said the funds would be used for organic growth and to meet tougher capital rules, not for acquisitions.
Out of AfricaPassing on Nedbank could be detrimental to HSBC's plan to grow in Africa, said Johann Scholtz, banking analyst at Afrifocus Securities.
"Nedbank would probably be their cheapest entry point into Africa and probably their least risky entry point.
"If they are concerned about the risk in Nedbank's book, then they are obviously not going into some of those Nigerian banks or some of those sub-Saharan banks."
Standard Bank Group [JSE:SBK], South Africa's largest lender, and
Absa Group [JSE:ASA], its largest retail lender, already have substantial foreign owners.
The only other possible target in South Africa would be
FirstRand [JSE:FSR], South Africa's second-largest lender.
"HSBC have made a strategic statement saying they are going to get involved in Africa, but I don't know how now," said Rob Nagel, senior portfolio manager at Cadiz Asset Management.
"A large part of the banking assets in Africa are sitting in Egypt, Nigeria and South Africa, and a lot of the Asian governments use South Africa as a springboard, so HSBC is obviously going to try some other way."
South African regulators, who have scuppered cross-border deals in the past, initially appeared open to the acquisition by HSBC. However, central bank chief
Gill Marcus later warned that foreign ownership of local banks brought risks.
Negative for the randSouth African analysts said the acquisition would be a positive for Nedbank, which has struggled with a weak retail unit.
Saddled with bad debts, its retail arm reported a headline loss of R115m in the six months to end-June.
The failed deal is also likely to be negative for the rand, which has gained on speculation of potential currency inflows.
The sale had been part of Old Mutual's strategy to refocus on insurance and asset management. The sprawling conglomerate, present in 35 countries, is under pressure from its biggest shareholders to reorganise amid concerns its complexity has held back its share price.