Qatar National Bank’s (QNB) first entry into sub-Saharan Africa (SSA) with the acquisition of a 12.4% stake in Ecobank Transnational last week indicates a strong vote of confidence in Ecobank after a series of governance mis-steps, while shifting the dynamics of banking in the region, say bankers and analysts.
It will also intensify the battle for ownership of the pan-African lender, which boasts top-three status in 15 of 32 of its markets in Africa.
QNB bought the stake from Nigeria’s ‘bad bank’ the Asset Management Corporation of Nigeria (Amcon), which took control of the stake after Ecobank merged its Nigerian operations with botched lender Oceanic Bank that the asset manager helped to recapitalize. QNB is likely to get to appoint a replacement for Amcon’s seat on the board.
Rival bankers welcome the move as indicative of the confidence held in the pan-African group by well-capitalized foreign investors while the Gulf appetite for Africa exposure underscores growing south-south flows.
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| Miguel Azevedo, Citi |
“For Ecobank, [the deal] shows recognition for the great work done by CEO Albert Essien in managing the bank through this very difficult period and strengthening of the capital structure for the new phase that is starting,” says Miguel Azevedo, head of investment banking for Africa at Citi.
“Moreover, for African banks, this investment, together with Atlas Mara and Union Bank, is a clear demonstration of continued interest from international strategic investors.”
During the past 12 months, Ecobank has come under scrutiny after allegations by the Nigerian regulators around governance issues, which culminated in the ousting of the bank’s chairman Kolapo Lawson in October 2013 and the bank’s chief executive Thierry Tanoh this March. Since then, Ecobank has being trying to restore its image and re-build confidence in the bank.
“It’s good to see that the group still attracts such strong institutional interest post the corporate governance issues last year and at a modest premium to market,” says Adesoji Solanke, SSA banking Analyst at Renaissance Capital.
The deal was executed at N20.01 versus a current market price of N17.0, implying an 18% premium.
Nedbank question
The QNB investment reawakens long-standing questions about Nedbank's ownership and business intentions.
In 2008, Ecobank and Nedbank entered a strategic alliance that allowed customers of each bank access to an expanded banking network. Ecobank expects the South African lender to convert a $285 million loan into shares in Ecobank before the end of the year and top-up the conversion amount with $206 million to give it a 20% stake in Ecobank.
On Wednesday, Nedbank management said it remained committed to its Ecobank shareholding, gunning to become the single-largest shareholder in the institution after Public Investment Corporation, a South African pension fund, which holds 18.2%. However, QNB's regional ambitions and strong balance sheet could complicate this endeavour.
According to a previous agreement, Nedbank has until November 25 to decide whether to move forward with the conversion. After the Nedbank deal, Ecobank expects its capital adequacy ratio to reach 18.7% of assets by the end of the year, up from 17.5% in the first six months of 2014.
“We calculate [that the QNB stake] will dilute to around 10% on the expected Nedbank stake take-up,” says Ilan Stermer, director and banking analyst at Renaissance Capital.
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If Nedbank had its eye on this Amcon stake
as a way of building a further holding, this likely puts paid to that idea for the next few years
Ilan Stermer
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“The QNB acquisition is a positive boost for Nedbank in the sense of a vote of confidence in ETI, and deep pockets should ETI require additional capital for growth. [But] if Nedbank had its eye on this Amcon stake as a way of building a further holding, this likely puts paid to that idea for the next few years.”
The Ecobank-QNB deal, worth an estimated $290 million, according to RenCap, is a step for the Arab bank to reach its goal of becoming the biggest bank in the Middle East and Africa by 2017. According to the group’s website, QNB is the largest bank in the Middle East and North Africa with more than 45% of banking-sector assets.
As Albert Essien, CEO of Ecobank states: "The transaction, which we have welcomed, was a transaction initiated by Qatar National Bank... I have said and maintain that this is a good development for Ecobank, as it gives us a chance to forge a mutually beneficial business relationship with another banking institution which will be of interest to our customers.
"The QNB deal will not affect the excellent partnership which Nedbank and ETI have had since we established our strategic and technical alliance in 2008. That alliance remains as strong as ever today. We shall continue to provide a unique one-bank experience to our clients across the largest banking network in Africa. That one-bank alliance today comprises more than 2,000 branches in 39 countries."
The deal marks QNB's second acquisition in the past two years on the continent. In March 2013, it completed the acquisition of Société Generale’s Egyptian business for $2 billion.