Nedbank’s headline earnings remained unchanged during the first half, but its planned acquisition of Kenya’s NCBA Group offers a clearer view of where the bank expects future growth.
The bank reported headline earnings of R8.4 billion for the six months to June, matching the corresponding period a year earlier.
Stronger income and tighter cost control were offset by higher impairments and the loss of earnings from Nedbank’s former shareholding in Ecobank Transnational Incorporated.
Underlying earnings show stronger growth
Removing the effect of the Ecobank exit presents a stronger earnings picture.
Headline earnings excluding Ecobank increased by 12%, while diluted earnings per share rose by about 15%.
Reported earnings per share grew by 2%.
The difference between the reported and adjusted figures shows how the loss of Ecobank earnings affected the headline result.
Shareholders support NCBA acquisition
Nedbank has secured enough shareholder support to proceed with its targeted 66% stake in NCBA Group.
Investors representing 79.9% of NCBA’s shares accepted the offer.
Most of the required regulatory approvals have been received. The remaining decisions are expected late in the third quarter or early in the fourth quarter.
The transaction was valued at approximately R13.9 billion when announced.
Deal combines shares and cash
Nedbank will fund 80% of the acquisition by issuing new shares, with the remaining 20% paid in cash.
The transaction involves approximately 43.6 million new Nedbank shares. These will represent about 8.4% of the bank’s enlarged share base.
The cash portion is expected to amount to about R3 billion.
Issuing new shares will dilute the holdings of existing Nedbank shareholders.
NCBA provides established regional platform
The acquisition gives Nedbank access to an existing banking platform in Kenya, Uganda, Tanzania and Rwanda.
NCBA also has digital operations in Ghana and Ivory Coast.
The group serves more than 60 million customers through 122 branches and its digital channels.
Its main areas of strength include digital lending, asset finance and corporate banking.
“The proposed deal brings together two organisations with highly complementary strengths,” Nedbank chief executive Jason Quinn said when the offer was announced.
Quinn highlighted NCBA’s regional presence and digital capabilities, alongside Nedbank’s balance sheet and experience in corporate and investment banking.
NCBA will retain its local identity
NCBA will keep its brand, local leadership team, independent governance structure and listing on the Nairobi stock exchange.
This arrangement reduces the level of operational integration required from Nedbank.
Instead of building a new East African business from the beginning, Nedbank is acquiring a functioning regional platform it intends to expand.
Regional growth will determine the deal’s value
Nedbank expects the transaction to have a broadly neutral initial effect on earnings growth and return on equity.
The longer-term outcome will depend on whether Nedbank successfully combines its corporate banking capabilities with NCBA’s digital reach and regional presence.
The acquisition gives Nedbank a new centre for its African strategy, but delivering meaningful regional benefits will determine whether the R13.9 billion transaction creates lasting value.
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