An ETI hangover
Nedbank results showed that those in the lending space are being extremely careful as its bad debt ratio was a very low 0.47%. As with the Barclays Africa results, this number surprised me and shows that banks have been very cautious in lending. Unfortunately for Nedbank, its cost-to-income (the bank calls it an efficiency ratio) hit 59.3% with the target being between 50% and 53%. The target certainly won’t be hit anytime soon, and shows how the cost of banking has increased since the global financial crisis of 2008/09. Nedbank also has to contend with the horror of Ecobank Transnational Incorporated (ETI) – in which it owns a 20% stake – that lost it R1.16bn in the first half of the financial year. This is another example of an acquisition into Africa going very wrong for a JSE-listed company and highlights just how cautious shareholders should be when management trumpets great deals it is doing. It nearly always overpays and often buys very poor businesses.