Ecobank Considers Sale of Stake in Nigerian Unit

By Olivier Monnier and Paul Wallace

Ecobank Transnational Inc. is considering selling a stake in its Nigerian subsidiary as part of a plan to raise about $500 million of equity for the unit.
“It’s possible that could happen,” Chief Executive Officer Albert Essien said about selling part of Ecobank Nigeria. He spoke by phone yesterday from Abidjan, Ivory Coast’s commercial capital. “There’s a board policy that we could, if we wanted, sell down and hold 75 percent in our subsidiaries.”
ETI, which operates in 36 African countries, needs to increase the capital of Ecobank Nigeria, its biggest subsidiary, by March next year to meet new rules from the Central Bank of Nigeria. A $500 million boost would take its capital-adequacy ratio to about 18 percent, above the minimum requirement of 16 percent, Jibril Aku, the managing director of Ecobank Nigeria Ltd., said on Nov. 14.
ETI has transferred to Ecobank Nigeria the “larger portion” of the
$206 million in cash it received in October when South Africa’s Nedbank Group Ltd. bought a 20 percent stake in ETI, Essien said. The rest of Ecobank Nigeria’s capital needs will come from retained earnings and a “private placement” of equity, he said.
Ecobank operates in the most African countries of any bank.
Nedbank and Qatar National Bank SAQ, the second-biggest owner of ETI with a 17 percent stake, haven’t been approached about buying a stake in Ecobank Nigeria, said Essien. Nedbank parent Old Mutual Plc said it earmarked 4.3 billion rand ($393 million) for African acquisitions. The Johannesburg-based insurer has identified Nigeria, Kenya and Ghana as key markets.
“The process has just started,” Essien said.

Capital Needs

Ecobank Nigeria, which had $9.6 billion of assets at the end of September, is the country’s seventh-biggest lender. It made a $157 million post-tax profit in the first nine months, up 79 percent from a year earlier, according to a presentation posted on ETI’s website.
The rest of the money from Nedbank’s acquisition has been put toward other subsidiaries, including Ecobank Kenya, Essien said.
“We know that some might need capital down the line,” he said in a separate interview in Abidjan yesterday. “They do for regulatory purposes and sometimes for business purposes.”
ETI’s rules prevent any institution from buying more than 24.99 percent of its shares and it prefers none to hold more than 20 percent to ensure a broad shareholder base, said Essien.
“The policy of keeping everybody at 20 percent is for diversification of shareholding,” he said by phone.
ETI has a $23 billion balance sheet and its stock trades in Ghana, Ivory Coast and Nigeria. Its shares fell 1.2 percent to 17 naira yesterday, giving it a market capitalization of 384 billion naira ($2.2 billion).