January 7, 2004

By Vernon Wessels

Johannesburg - It would take Nedcor some time to "regain its mojo" so investors should adopt a wait-and-see approach before buying the stock, according to Alan Hartdegen, a banking analyst at Merrill Lynch.

The banking group's share price has surged over the past trading days amid speculation that its parent company, Old Mutual, might sell its 53 percent stake in Nedcor to an international bank.

Hartdegen, in a research report written after a R2 billion capital injection from Old Mutual and when Nedcor's share price was hovering just below R60, about two weeks ago, has a neutral recommendation on the stock.

Little has changed since the research note was issued, other than media speculation that Old Mutual had approached several banks, including Standard Chartered, HSBC and Citigroup, to acquire its Nedcor stake, which sent the share price surging to just under R70. Old Mutual has denied it intends selling Nedcor.

"Investment risks include its small retail component, poor earnings visibility, merger integration risk [following the BOE acquisition] and lack of a positive near-term catalyst," Hartdegen said. 

An analyst, who may not be quoted, said Old Mutual might have inadvertently dressed Nedcor up for a potential sale by embarking on a major clean-up of the group's balance sheet and simplifying its structure.

"The bank needed to be simplified and its balance sheet reviewed but as a consequence this would attract a potential suitor. I do not think, however, that those were Old Mutual's intentions," the analyst said.

"I don't see Old Mutual disposing of Nedcor anytime soon."
Nedcor's share price hit an intraday high of R69.50 yesterday but pulled back slightly to close at R68.20, a drop of 60c on the day, following a more than 11 percent improvement in the stock since last Wednesday.

Investors buying Nedcor shares at these levels were either betting on corporate activity, such as a merger or takeover, or taking a two-year view that there would be improvements at the banking group, the analyst said.

Investec Securities banking analyst Greg Saffy has upgraded Nedcor to a buy on the view that the banking group will not have to raise additional capital.