An ETI han­gover

Finweek English Edition - - Marketplace -

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.

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