January 16, 2004

By Reuters

Cape Town - Jim Sutcliffe, the chief executive of Old Mutual plc, yesterday dismissed as "absolute rubbish" reports that the group planned to sell its 53 percent stake in bank subsidiary Nedcor.

"We are committed to fixing Nedcor and supporting Tom Boardman [the new chief executive at Nedcor] and his team," Sutcliffe said.

His words effectively quash persistent market speculation that Old Mutual had approached several banks, including Standard Chartered, HSBC and Citibank, to sell its shareholding in Nedcor, after the bank had failed to regain its profit momentum following the acquisition of BoE.

Nedcor's share price fell 1.45 percent to R64.90 yesterday, in line with the decline in the JSE Securities Exchange's banks index of 1.87 percent.

Meanwhile, CA-Ratings, the credit ratings agency, said in its first report on Nedcor that Old Mutual had demonstrated its support for Nedcor through a R2 billion loan at the end of 2003. Old Mutual seconded Bob Head, its strategy director, to act as chief financial officer at Nedcor until a new one is appointed. 

CA-Ratings gave Nedcor a strong long-term zaAA- and a short-term zaA1+. With assets of R315 billion and liquidity above industry averages, CA-Ratings said Nedcor had a strong position in corporate banking and although its retail operations were lagging domestic competitors, a strong focus had been placed on improving market share.

While its recent performance had been hurt by once-off costs of the merger with BoE, thinning interest margins were caused by the lower interest rate environment and long-term finance raised to fund the BoE acquisition. The new-found strength of the rand continued to cause translation losses on its foreign assets.

"[Nevertheless], the asset quality of the bank is satisfactory and implementation of accounting standard AC 133 brought provisioning policies more in line with industry practices. Non-performing loans are relatively stable and provision coverage has improved," CA-Ratings said.

Old Mutual closed 13c higher at R12.04 yesterday.