The pressure is on for Nedbank to deliver its East Africa pivot after getting burnt in West Africa, crystallising an 80% loss with the sale of its 21% stake in Ecobank Transnational Incorporated (ETI) and underscoring the risks of minority-stake banking in volatile markets.
The $100m divestment of a stake in Ecobank, which was acquired for $500m (or about R9bn now), comes after a decade that delivered R400m in dividends against R6.9bn unrealised losses and a $293m impairment.
ETI’s annual report for the year ended December 2024 shows the group was valued at about $447m, less than Nedbank paid for its minority stake, highlighting how far down the rabbit hole the company’s fortunes have gone over the past decade.
Nedbank had little room to negotiate the selling price, as its investment in ETI had a carrying value of R1.8bn and a market value of R1.9bn at the end of June.
A Nedbank spokesperson told Business Day that material conditions were completely different when the investment decision was made.
“The initial transaction, which was concluded more than a decade ago, was done on the back of a very different outlook for the economies in West Africa, and in particular Nigeria,” the spokesperson said.
“Before taking a 21.2% share in ETI, Nedbank had a convertible loan, which afforded Nedbank the time to assess the progress and performance of ETI through its public disclosures as a listed company at such time.”
Still, Nedbank has now set its sights on the fast-growing East Africa market and the Southern African Development Community (Sadc) region, markets forecast to outpace SA’s growth, having already snapped up fintech outfit iKhokha for R1.6bn to bolster its small and medium enterprise and mid-corporate lending.
Strategic misstep
The strategic misstep of buying a minority stake with little control seems to have been Nedbank’s undoing, with the lender now looking to invest in businesses it owns and controls. By the end of 2024, Nedbank held just two of Ecobank’s 14-member board seats in the form of Brian Kennedy and Terence Sibiya.
A Nedbank spokesperson concedes its minority shareholding crimped influence but pins most of the damage on Nigeria’s downturn, regulatory uncertainty and lost SA clients.
“The board and management also recognised the risks of continuing to hold on to the investment due to regulatory uncertainty and potential increasing capital requirements, which may have resulted in a scenario where Nedbank would have been required to inject additional capital to prevent shareholding dilution,” the spokesperson said.
“Over the time that Nedbank has held an interest in Ecobank, associate income of R6.8bn has been recognised; however, only R0.4bn [R400m] has been realised through dividends received. The investment also led to unrealised FCTR [foreign currency translation reserve] and OCI [Other Comprehensive Income] losses of R6.9bn accounted for through reserves over time.”
The exit from Ecobank marks the second major transaction by Nedbank under Jason Quinn, after the purchase of iKhokha (R1.65bn), one of the fastest growing fintech companies in Africa, as the lender looks to grow its SME lending market share.
Quinn, who took control of the group just over a year ago after the retirement of Mike Brown last year, wasted little time in restructuring the group, shaking up the lender’s retail and business banking divisions. The restructuring led to the creation of business and commercial banking, a juristic-focused cluster that will cover SMEs and commercial clients.
Nedbank has also restructured the business to place greater emphasis on mid-sized corporates, typically those businesses with an annual revenue of R1bn and above, with the lender targeting a market share of 25%.
Attention will now be on Quinn and how he leads the group’s expansion into the rest of Africa, with many countries on the continent growing at a faster rate than SA, from where the bank still derives a large chunk of its earnings.
The bank’s SA franchise contributed 90% of the group’s R1.4-trillion in assets and 79% of the group’s R16.9bn headline earnings in the 2024 financial year.
In comparison, Standard Bank derives more than 40% of its earnings from its Africa regions portfolio, which stretches to 20 countries (excluding SA) with the recent addition of Egypt.
Standard Bank has also enjoyed success in West Africa, where it controls several entities. In the latest half-year earnings report, Standard Bank’s West Africa region, which houses the likes of Nigeria and Ghana, reported a 49% surge in headline earnings to R3.5bn, with a return on equity of 39.1%.
In its annual report, Ecobank chair Papa Madiaw Ndiaye said several internal and external factors influence share prices.
“The valuation may reflect issues such as asset quality, capital and profitability concerns in Nigeria, the complexity of our group structure, corporate governance challenges, group-wide capital adequacy, and the lack of regular dividend payouts,” he wrote in a letter to shareholders.
“Additionally, macroeconomic and regulatory factors affecting the banking sector, competitive dynamics and geopolitical risks also play a role.”
On the lack of regular dividend payouts, Ndiaye said the focus has been on strengthening the balance sheet to pave the way for accelerated growth.
He said to this end, the group faced the difficult decision of either servicing its debt and complying with existing debt covenants or paying dividends.
Ecobank in September got approval from bondholders on a blueprint to hike its capital buffers, helping the lender avoid a potential default. This came as it breached a covenant on a $300m obligation after the devaluation of the naira.
Formed in Togo 40 years ago, ETI has evolved into a continental bank, serving millions of customers across 35 Sub-Saharan Africa.
With Jacqueline Mackenzie
Update: August 17 2025
This story has additional information.
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