At­las Mara: Di­a­mond cut­ter

Financial Times USA - - COMMENT -

Pliny the El­der pur­port­edly re­marked that “there is al­ways some­thing new” out of Africa. Ex-Bar­clays boss Bob Di­a­mond hopes in­vestors in his African bank­ing ve­hi­cle take a sim­i­larly op­ti­mistic view and ar­rest the freefall in its share price. Yes­ter­day At­las Mara axed chief ex­ec­u­tive John Vi­talo and an­nounced deep cost cuts. A be­lated sav­ings pledge is wel­come — but scep­ti­cism about the ven­ture re­mains.

At­las Mara owns sev­eral banks in east­ern and south­ern Africa and a stake in Union Bank of Nige­ria. Chair­man Di­a­mond ar­gues his team brings op­er­at­ing ex­per­tise in ar­eas such as trea­sury, trade and com­mod­ity fi­nance, dig­i­tal bank­ing and part­ner­ships via credit card com­pa­nies such as MasterCard and Visa.

Such prow­ess has hith­erto had lit­tle value in the face of a com­mod­ity price slump, de­pre­ci­at­ing lo­cal cur­ren­cies and wors­en­ing eco­nomic growth. As prospec­tive prof­its have de­clined, so has At­las Mara’s mar­ket cap­i­tal­i­sa­tion. A slump of more than 80 per cent since list­ing in 2013 means the shares have un­der­per­formed both Johannesburg-listed Bar clays Africa and Stan­dard Bank by a sim­i­lar amount in dol­lar terms.

More­over, Mr Di­a­mond’s bank­ing skills ap­ply only to the banks that At­las Mara con­trols, which are loss­mak­ing. It does not op­er­ate Union Bank, and its 31 per cent stake is the only thing keep­ing At­las in the black.

Hence the fo­cus on thrift. About $20 min tar­geted an­nual sav­ings would nearly dou­ble pro­jected an­nual earn­ings per share to about 37 cents af­ter tax. That would value the shares at a cheap five times for­ward earn­ings, a much steeper dis­count to peers; this at a time when in­te­gra­tion costs re­lated to ac­qui­si­tions in Rwanda and Zam­bia last year should soon roll off.

Right now, val­ued at a measly 30 per cent of book, the most value-ac­cre­tive thing At­las Mara could do is sell up and re­turn the money to share­hold­ers.

Blood-let­ting may have cured some ills in Pliny’s time but that will do only so much at At­las Mara.

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