Nedbank shares fall on Ecobank inquiry report

Nedbank shares fell by more than 4% on Tuesday after a South African newspaper report that Nigeria’s accountancy regulator had begun a probe into its West African associate Ecobank.

Nedbank, which is one of South Africa’s four largest lenders, holds a 21% stake in Ecobank and its relationship with the Togo-based lender was just starting to pay off after years of disappointment.

Mfundo Nkhuhlu, Nedbank’s chief operating officer, said in a statement that neither the South African lender, nor the board of Ecobank’s Nigeria-listed holding company Ecobank Transnational Incorporated were aware of any probe. Ecobank did not respond to requests for comment.

“Consequently, it has not arisen that there is any need to notify the JSE and shareholders,” Nkhuhlu said, referring to Johannesburg’s stock exchange.

Reuters was unable to confirm the existence of a probe by The Financial Reporting Council of Nigeria, which South Africa’s Sunday Times said related to allegations by a former Ecobank executive that it inflated its accounts by applying incorrect exchange rates.

When contacted by phone, the council said it did not discuss its investigations and would not immediately comment.

A probe into its associate would make Nedbank the latest South African company to take a hit from the actions of regulators in Nigeria, where telecoms firm MTN is facing the prospect of handing over billions of dollars in taxes over allegations it breached foreign exchange rules.

“I think it’s going to be a theme going forward, Nigeria’s a tough market to do business in, you are always clashing with the authorities,” Greg Davies, equities trader at South Africa’s Cratos Capital told Reuters.

A slide in commodity prices and unfavourable currency swings had already left Ecobank struggling in Nigeria, its second largest market by assets, driving it to a $131.3 million loss before tax in 2016.

It said it returned to profitability one year later, citing an easing of both factors throughout 2017, and has been a boost to Nedbank’s earnings so far this year.

Nedbank shares had regained some ground by 1333 GMT, when they were down 2.6% to R258. ETI’s shares were flat at market close.

Also on Tuesday, Nedbank repurchased 7.1 million shares from minority shareholders, worth 1.41% of its issued share capital, for R1.95 billion ($136 million). ($1 = R14.31)