SUNDAY TIMES - Nedbank has no separation anxiety
Sunday Times Business By DINEO TSAMELA, 2017-03-12 00:00:00.0

Nedbank has no separation anxiety

NEW DIRECTIONS: The new headquarters of Old Mutual under construction in Sandton.

The break-up of Old Mutual is unlikely to disrupt Nedbank's operations to the extent that its peer, Barclays Africa, is being affected by its separation from UK parent Barclays plc.

While many analysts feel that Old Mutual is trading at a discount and the "true" value of the business will be unlocked once the separation is complete, Nedbank is trading at a premium relative to its peers and the market.

"From a target price perspective, there was a time when Nedbank was a bit undervalued but we've seen it trade close enough to its fundamentals to imply that Old Mutual's ownership doesn't have a material impact on the share price," said Harry Botha, a banking analyst at Avior.

Unlike Old Mutual Emerging Markets, said Botha, Nedbank's being a listed entity meant one did not see the discount factor that affected Old Mutual's other businesses.

Botha also said there was little concern about possible fore-selling following OMEM's listing as a separate company and the subsequent distribution of most of its stake in Nedbank. OMEM will only retain a strategic minority stake.

Nedbank CE Mike Brown said the bank fully supported the separation and it would not have any impact on the lender operationally.

"From a Nedbank point of view, that's very much a business-as-usual transaction. We have not integrated systems or brands, so there are no implications for our strategy, our business or customers. It's purely a shareholder distribution transaction, not a sale," he said.

Analysts' expectations that Nedbank's performance will pick up stems from the expectation that West African bank Ecobank's losses will be filtered out in this financial year and should begin making a positive contribution in the second half of the 2017 financial year, or by 2018 at the very latest.

Ecobank suffered big losses over the past couple of years because of the naira's devaluation and impairment costs in the regions in which it operates.

Nedbank owns 20% of the bank, which has operations in West African countries such as Ghana, Nigeria and Guinea.

Brad Preston, chief investment officer at Mergence, said Old Mutual's plan to distribute Nedbank shares to shareholders could be an opportunity to increase the number of black investors.

It "should be seriously considered", he said.

But Old Mutual plc chief executive Bruce Hemphill said that whether or not this happened was up to the boards of the companies. "It's much better that the boards of these businesses, once they are free of the plc structure, determine for themselves how they want to deal with these issues," he said.