Atlas Mara: Diamond cutter
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.