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Voluntary Announcement Relating to the Release of 2016 Ecobank Transnational Incorporated Financial Results
NEDBANK GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
(’Nedbank Group’ or ’the Group’)
VOLUNTARY ANNOUNCEMENT RELATING TO THE RELEASE OF 2016 ECOBANK
TRANSNATIONAL INCORPORATED FINANCIAL RESULTS
Nedbank Group shareholders are referred to the Ecobank Transnational
Incorporated (ETI) financial results announcement for the full year 2016,
which was released by ETI on 18 April 2017.
ETI is our strategic partner in Central and West Africa and we have a
shareholding of approximately 20% in ETI. As disclosed in the Group’s
Integrated Report at 31 December 2016, the carrying value of this
investment in ETI, net of a R1,0bn impairment provision, was R4,0bn and the
Group’s market capitalisation was R118,0bn. The carrying value represents
approximately 3,4% of the Group’s market capitalisation.
Associate earnings from the Group’s share of ETI’s attributable income are
equity accounted one quarter in arrear using ETI’s publicly disclosed
results. ETI reported an attributable loss of USD250m for the full year
2016, including an attributable loss of USD427m for the fourth-quarter in
2016. The Group will equity account its share of ETI’s fourth-quarter loss
in the first quarter in 2017. The Group’s Q1 2017 associate loss from ETI
therefore amounted to approximately R1,2bn (Q1 2016: R676m loss).
Accounting for this associate loss in Q1 2017, together with Nedbank’s
share of ETI’s Other Comprehensive Income (OCI) and Nedbank FCTR, will
decrease the carrying value of the Group’s investment in ETI from R4,0bn in
December 2016 to approximately R2,9bn in March 2017.
The ETI board also announced a proposed convertible bond issue of up to
USD400m of which approximately USD300m is currently supported by existing
shareholders. USD200m of this funding will be used to repay the short-term
financing used in setting up a resolution vehicle in Nigeria with the sole
objective of ring-fencing the legacy loans from Nigeria’s core bank. The
remaining funding raised is for a conscious debt restructure of the
maturity profile of the ETI Holdco balance sheet. The bond matures 5 years
from issue date and the conversion price of the offer is 6 USD cents
compared to a current price of 3 USD cents with an interest rate of 6.46%
above LIBOR. Nedbank Group is currently not part of the group of existing
shareholders who have indicated appetite for the USD300m of this funding as
the commercial terms of this convertible bond do not meet Nedbank’s
required internal rate of return.
ETI’s 2016 performance reflects the tough economic environment in Nigeria
which represents 32% of its advances. In Nedbank Group’s 2016 financial
results announcement we noted that: ‘Conditions in the key markets in which
ETI operates are currently expected to remain difficult in 2017, before
improving in 2018 and beyond’. Consequently, these ETI results and in
particular the Q4 2016 results are largely as anticipated at the time
Nedbank Group reported its 2016 results and impaired its investment in ETI
by R1,0bn.
The long-term growth potential of financial services in the rest of Africa
remains attractive. We therefore remain committed to our strategy and
investments in the rest of Africa, to ETI as our partner in Central and
West Africa and to growing the Group’s own operations in SADC and East
Africa.
Ade Ayeyemi, ETI Group CEO, said in the ETI announcement: ‘The Francophone
West Africa and Anglophone West Africa regions continue to perform
positively generating over 40% of the Group’s revenues at a return on
equity above 24% and 32% respectively. We remain the leading bank in these
regions. I remain confident in the result of the cost efforts and in our
ability to deliver a leading service for our customers which will be
reflected in improved key performance indicators in 2017 and beyond.’
Mike Brown, Chief Executive of Nedbank Group noted: 'The extent of the oil
and commodity crisis and its impact on the Nigerian economy resulted in
Nigeria’s first recession in 25 years. This has negatively impacted ETI’s
short term performance and profitability. We expect that as the Nigerian
economy recovers and ETI builds on their strong positioning in Central and
West Africa that longer term performance will improve off a low base. We
remain supportive of the strengthened ETI management team and will continue
to work closely with ETI’s shareholders, board and management team to
unlock value.’
An update on Nedbank Group’s performance for the first quarter of 2017 will
as usual be provided to shareholders at our Annual General Meeting on 18
May 2017 and Nedbank Group’s interim results for the six months to 30 June
2017 will be published on 31 July 2017. The financial information on which
this voluntary announcement is based has not been reviewed or reported on
by the group’s auditors.
Sandton
18 April 2017
Sponsors to Nedbank Group in South Africa:
Merrill Lynch South Africa (Pty) Limited
Nedbank CIB
Sponsor to Nedbank Group in Namibia:
Old Mutual Investment Services (Namibia) (Pty) Ltd
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