West & Central Africa: Results disappoint but outlook is bright

In September it paid $270m to Nigeria’s Asset Management Corporation (Amco) to increase its stake in Union Bank of Nigeria from 9% to 29.9%. Amco is an offshoot of the Central Bank of Nigeria that manages assets held by failing banks.

Union Bank of Nigeria has moved up in our regional table from 15th to 6th over the past year, combined with a jump from 47th to 21st in our pan-African table. This has been achieved by a near trebling of its Tier 1 capital from $420m to $1,210m.

Another Amco deal resulted in Qatar National Bank (QNB) buying a 12.5% stake in Ecobank Transnational (ETI) for $220m, not because of any problems with strongly performing Ecobank but because the equity had been owned by the failed Oceanic Bank.

Ecobank is among the top three players in 15 African countries. A spokesperson for QNB said: “This move further consolidates the growth strategy pursued by the QNB group over recent years.” QNB has announced a target of becoming the biggest bank in the Middle East and Africa by 2017, overtaking South Africa’s Standard Bank in the process.

Nedbank is due to give Ecobank another $206m while converting its loan into shares by the end of this year

QNB followed this up with the purchase of another 11% stake in the company for $283m. South Africa’s Public Investment Corporation holds another 20% stake in the firm but some in West Africa fear that the bank’s African character could be affected by QNB becoming the biggest shareholder.

However, a share-restructuring plan designed to accommodate Nedbank should take the Qatari stake below 20%. Ecobank chief executive Albert Essien said: “This could be very complementary to Nedbank. QNB is from the Gulf. Nedbank is from the south. It could help the institution to grow stronger.”

Nedbank has a strategic alliance with Ecobank to share their networks, while the South African bank also made a $285m loan to its partner in 2008. Nedbank is due to give Ecobank another $206m while converting its loan into shares by the end of this year.

Ilan Stermer, a director of Renaissance Capital, said: “We calculate [that the QNB stake] will dilute to around 10% on the expected Nedbank stake take-up. The QNB acquisition is a positive boost for Nedbank in the sense of a vote of confidence in ETI, and deep pockets should ETI require additional capital for growth. If Nedbank had its eye on this Amco stake as a way of building a further holding, this likely puts paid to that idea for the next few years.”

Miguel Azevedo, head of investment banking for Africa at Citi, said: “For Ecobank, [the deal] shows recognition for the great work done by chief executive Albert Essien in managing the bank through this very difficult period and strengthening of the capital structure for the new phase that is starting. Moreover, for African banks, this investment, together with Atlas Mara and Union Bank, is a clear demonstration of continued interest from international strategic investors.”