| Wed 17 Nov 2004, 13:22 | | Standard Chartered may be eyeing Nedcor |
|
Standard Chartered may be eyeing Nedcor
--------------------------------------------------------------------------------
Nedcor may be the most likely target for emerging market banking group Standard Chartered as it moves to strengthen its presence in the South African market.
Standard Chartered has signalled its intention to grow its retail presence in SA, which it says it will do either organically or through acquisition.
But analysts say this will be a slow process unless it buys a South African bank.
With all indications pointing to a favourable outcome for Barclays` bid for Absa, Kokkie Kooyman, portfolio manager of the Sanlam Global Financial Fund, says other foreign banks, including Standard Chartered, are likely to make bids for South African institutions.
But due to Standard Chartered`s much smaller market capitalisation, it may be left with fewer options than Barclays.
At £36,8bn (R411bn), Barclays` market capitalisation is three times the size of Standard Chartered`s figure of £12bn (R134bn).
To buy a majority stake in either Standard Bank, w hich has a market capitalisation of R77bn, or FirstRand, valued at R68,5bn, would be too expensive for the group and would also place too much risk in one region.
That leaves Nedcor, which at R27,9bn would be much more digestible for Standard Chartered.
A majority stake would cost about R14bn, although parent company Old Mutual and other shareholders would probably demand a premium if they were to agree to a sale.
`Nedcor for them would be the most logical one because it`s the smallest,` says Kooyman.
Although Old Mutual is on record as saying its Nedcor stake is not up for sale, it has been suggested that it may sell part of its 53% stake in a joint venture with Standard Chartered, with the view to offloading the balance once Nedcor`s share price has recovered.
The group has a three-year recovery plan that aims to return its financial performance to levels currently enjoyed by its rivals. Old Mutual could also negotiate to retain its bancassurance relationship with Nedcor even if it sold its interests.
Alternatively, Standard Chartered could negotiate to buy a controlling stake in First National Bank from FirstRand. FirstRand recently reorganised its banking operations, which one analyst says could mean it is `dressing up FNB so they can flog it off`.
But due to FNB`s importance within the FirstRand group, he says, it may not be an attractive option for FirstRand.
`It is an extremely important part of the group and it would be difficult to rip it out of FirstRand without affecting the rest of the business units,` he says.
He estimates that FNB is worth between R20bn and R25bn.
`And it arguably has a better retail footprint than Nedcor,` he says.
