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Nedbank to play second fiddle

Jun 03 2010 07:15 Marc Ashton

Company Data

Nedbank Group Ltd [JSE : NED]

Last traded R158.90
Change R1.50
% Change 0.95%
Cumulative volume 428,017
Market cap R80.63bn

Last Updated: 13/02/2012 at 19:33. Prices are delayed by 15 minutes. Source: McGregor BFA

 

Old Mutual Plc [JSE : OML]

Last traded R19.23
Change R0.32
% Change 1.69%
Cumulative volume 6.05m
Market cap R106.96bn

Last Updated: 13/02/2012 at 19:33. Prices are delayed by 15 minutes. Source: McGregor BFA

 

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Johannesburg - Old Mutual [JSE:OML] is not entertaining suitors for its stake in Nedbank [JSE:NED], but has stuck a noose around the neck of any growth plans the bank may have.
 
Paul Hanratty, head of Old Mutual Plc's long-term savings division, on Tuesday dismissed speculation the group was planning to offload its 52% stake in Nedbank. However, he made it clear Old Mutual would have preference if any division within the group required capital for expansion.

"At some point there is going to be competition for resources [capital]," said Hanratty.
 
There has been much speculation in recent months around the future of Nedbank, with international banking group Standard Chartered being tipped as a likely suitor.
 
"We have not been talking to Standard Chartered or anyone about Nedbank," Hanratty said.
 
These comments, however, place Nedbank in a catch-22 situation.
 
Earlier this year Old Mutual CEO Julian Roberts clearly laid out targets for businesses within the group, saying those which are unable to consistently deliver 15% return on equity (ROE) would be put up for sale or disposed of.
 
When Nedbank reported full-year results in March 2010, its ROE fell from 17.7% to 11.5%. The sector as a whole faces increased competition from smaller players and a barrage of regulatory changes, which mean it may have to hold higher levels of capital on its balance sheet in future.
 
If Nedbank cannot leverage capital off the Old Mutual balance sheet, this could hold it back from making acquisitions that could drive its growth path and improve its return to shareholders.
 
 - Fin24.com

 

 
 
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