Ecobank’s CEO Albert Essien said, on Monday, that he was “confident” that South Africa’s Nedbank would convert its $285 million loan to the pan-African bank into shares, top it up with an additional $206 million to get a 20 percent stake in the Lome-headquartered bank.
But Nedbank is yet to decide whether to take up Ecobank’s offer with CEO Mike Brown saying two weeks ago that the South African bank had until November to decide if it will consider the offer under a strategic alliance it has with Ecobank.
However, that decision is expected to be positive as Nedbank, interested in expanding across Africa, had in 2013 expressed its desire to exercise its right to convert the $285 million loan to Ecobank which is present in 36 countries. Then, Nedbank reportedly had a 12-month window, starting in December, to convert the loan into Ecobank shares, that window closes this November.
Ecobank is as well very enthusiastic for the debt conversion deal to go through as it, the bank says, will raise its adequacy ratio to 18.7 percent of assets by year-end from 17.5 percent in the first six months of the year.
“The Nedbank stake is capped at 20 percent. If they do convert … I think that will strengthen the business relationship that we have (had) since 2008,” Reuters quotes Essien as saying while discussing the bank’s half-year results.
“The conversion will trigger reciprocal board seats. We see it as very positive and we expect that it will happen,” the Ecobank CEO added.
Thus Ecobank doesn’t just want Nedbank’s loans, it wants it investing. Nedbank’s alliance with Ecobank, initiated in 2008, also gives Ecobank Transnational reciprocal rights to buy into Nedbank.
Nedbank’s is not the only loan Ecobank is hopeful of converting into shares. CEO Essien also disclosed that the bank expected the European Investment Bank (EIB) to convert about $58 million of debt into shares.
Last month, Ecobank reported a 27 percent rise in its first-half pre-tax profit to $257.2 million which analysts say was thanks to the bank’s tenacious focus on efficiency which oversaw a fall in cost-to-income ratio. Profit after tax also rose by 15 percent to $195.2 million, compared with $169.8 million.
A leading banking group in Africa, Ecobank recently set up operations in Mozambique and secured a banking licence in Angola. As of December 2012, its customer base was estimated at 13.7 million, with 9.6 million (70.2 percent), located in Nigeria, the continent’s most populous nation.
