January 5, 2004

By Mokgadi Pela, Bloomberg and Reuters

Johannesburg - Nedcor, the country's third-largest bank by assets, yesterday declined to comment on media reports that Old Mutual, its parent company that spent $3 billion expanding outside its main South African market, was seeking to sell its 53 percent stake in the bank.

The move could lead to the sale of the whole lender for about $3.6 billion. Potential buyers might include Standard Chartered, HSBC Holdings and Citigroup.

The move could be interpreted as a vote of no confidence in Tom Boardman, the new chief executive who took over recently following the retirement of Richard Laubscher.

In November, Old Mutual loaned R2 billion to Nedcor to help it meet minimum capital requirements.

At the time, Old Mutual's finance director, Julian Roberts, said the move showed the company was committed to keeping the Nedcor stake.

Old Mutual also appointed its strategy director, Bob Head, as Nedcor's acting chief financial officer.

Old Mutual's board in December "confirmed its ongoing commitment to the turnaround process at Nedcor".

Nedcor has a market capitalisation of R17.7 billion. At the time of the capital injection from Old Mutual, Nedcor said it expected to report a loss in 2003 as it wrote down the value of investments in technology, implemented new accounting standards and set aside money for taxes.

The bank's shares declined 44 percent last year. Nedcor shares closed up R2.64 at R64.49 on Friday, giving the company a market capitalisation of about R17.7 billion and making Old Mutual's stake worth about $1.4 billion. Old Mutual shares closed 6c up at R11.19. 

Following Nedcor's profit warning and the capital injection from Old Mutual, ratings agency Fitch downgraded Nedcor's national short-term credit rating to F1 from F1+ and affirmed its support rating at 5.

The agency said it had downgraded the international long-term foreign currency rating of Nedbank, it's banking unit, to BBB- from BBB.

Reacting to the media reports, Don Bowden, Nedcor's spokesperson, said: "We don't comment on rumours. We think it is Old Mutual that has to comment and not us."

Ned Pillay, Old Mutual's head of communications, said: "We can never comment on market speculation. We are working with Nedcor management to fix Nedcor."

Standard Chartered, which makes about two-thirds of its earnings in Asia and plans to expand in South Africa, already had appointed UBS to advise it on a possible acquisition, said The Business, a London newspaper.

Old Mutual could use the sale proceeds to buy rival insurers, according to newspaper report.

HSBC is the world's second-largest bank by market value.

Citigroup is the world's largest financial company.

Neither company could be reached for comment.