April 16, 2004

By Edward West

Cape Town - Nedcor and Old Mutual were negotiating a merger between their investment in Zimbabwe, the Merchant Bank of Central Africa (MBCA), and Trust Holdings, the shareholder of Zimbabwe's Trust Bank Corporation, it emerged yesterday.

The MBCA has over 50 years experience of corporate banking in Zimbabwe, while Trust Bank is positioned in the country's corporate and commercial banking sector, with 14 branches in Harare and Bulawayo. The MBCA is an associate investment of Nedbank.

Explaining why the MBCA intended to merge with another bank in Zimbabwe, even if the deal was being done at a very small, but as yet undisclosed price, Nedcor spokesperson Don Bowden said there had been about 30 smaller banks in Zimbabwe over the past decade, but many of the banks experienced difficulties during a banking crisis in December last year.

The Zimbabwean Reserve Bank ended up having to support six banks.

However, banks with strong controls and foreign shareholder support benefited from the crisis as clients supported these banks.

The MBCA, which has been positioned as a merchant bank and was granted a commercial licence in August last year, was one of the banks that benefited. It even had to close its doors to new business at one stage. 

Prior to the banking crisis, Trust Bank was a top-rated bank in Zimbabwe.

The Zimbabwean Reserve Bank governor then said he supported a consolidation in the banking industry and the MBCA decided that unless it became part of the consolidation process now, it would lose out in future.

The Trust Bank merger was an opportunity that was likely to occur only once in Zimbabwe and the low price was an added incentive.

"Trust Bank's client base is similar to the MBCA. The merger will allow the combined entity to establish a strong base in the corporate and commercial markets."

Due diligence is being conducted.

Bowden said that while Nedcor's main focus continued to be its South African banking operations, its strategy included building a strong base throughout southern Africa.

Nedcor's share price lost 10c to close at R60.46, in line with the 1.32 percent decline in the sector.