Ecobank Transnational Incorporated (ETI), has foreclosed the plan of selling some its stake in its Nigeria subsidiary, Ecobank Nigeria Limited, due to falling equities’ prices. The Chief Executive Officer of the bank, Mr. Ade Ayeyemi, stated this in an interview with Bloomberg.
The bank had said that it would sell part of its stake in Ecobank Nigeria Plc by the end of the year to boost its working capital and meet up with the Central Bank of Nigeria (CBN)’s directive on minimum capital threshold.
ETI had planned to raise as much as $400 million with a sale of about 25 per cent of the Nigerian subsidiary.
But the bank’s shares have fallen by 12 per cent since the end of June, amid concern among investors that a slowdown in China, sub-Saharan Africa’s biggest trading partner, and a looming rise in U.S. interest rates may weigh on economic growth.
According to Ayeyemi, falling market values mean the bank would not get good deal from the sale. “The market is not right for us to be selling part of that unit. “We will not be doing any dilution at the moment. You cannot sell an asset you don’t have to sell at the time when market prices are at the bottom of the trough,” he said.
“We are adequately capitalized at the moment,” Ayeyemi said. “If there are business opportunities that require us to have more capital, we will support that. We always have the option in future,” he added. The bank’s biggest shareholder, Nedbank Group Ltd., said it was against being diluted by a sell down of the Nigerian business, which is Ecobank’s largest. The South African lender spent almost $500 million buying a 20 per cent stake less than a year ago.
“By raising tier 1 capital at subsidiary level, you’re possibly diluting those who own Ecobank from the holding company level,” Mfundo Nkuhlu, Chief Operating Officer at Johannesburg-based Nedbank, said in an interview at Bloomberg’s offices on Sept. 23. “Any capital raise needs to be economically sensible to the holding company shareholders.”
Togo-based Ecobank operates in 36 African countries, more than any other lender.