Absa Group Ltd., (ASA) the South African bank controlled by Barclays Plc (BARC), sued the country’s fourth- largest bank, Nedbank Group Ltd. (NED), for 773 million rand ($95 million) in trading losses.
Absa has “issued a summons against Nedbank in relation to the events surrounding the trading of single-stock futures over the shares of Pinnacle Point Holdings, and subsequent defaults,” Marthinus Van Rensburg, the head of Johannesburg- based Absa’s legal team, said in an e-mailed statement today. The lender “cannot comment further in relation to this matter, which is now the subject of legal proceedings,” he said.
A Nedbank unit, Syfrets, had to buy shares in a South African leisure and property company called Acc-Ross in 2007 when it traded the single-stock futures in the company on behalf of clients of South African stock broker, Cortex Securities. The holding in Acc-Ross, which was renamed Pinnacle Point Group Ltd. (PNG) in 2008, increased beyond 35 percent, which by law should have forced Nedbank to make an offer to minority shareholders. Pinnacle Point shares declined more than 90 percent after Nedbank sold its stake.
Barclays Plc-owned Absa was obligated in 2008 to acquire stakes in Pinnacle Point and three other companies after Cortex, for which Absa was the clearing bank, defaulted on payments for the single-stock futures linked to the four stocks. Absa in 2010 agreed to sell its Pinnacle stake after taking a 931 million- rand writedown on the investment.
Nedbank, which is controlled by Old Mutual Plc (OML), successfully argued in a hearing with the Securities Regulation Panel in May 2010 that it was an intermediary and not intent on gaining control of Acc-Ross.
“The Securities Regulation Panel looked at issues surrounding the Pinnacle single-stock futures and ruled in our favor and similarly we do not think this claim has any merit,” Nedbank Chief Executive Officer Mike Brown said in an e-mailed response to questions today.
“The whole matter is fraught with negligence and recklessness, but we cannot find any indication of an intention on the part of Nedbank to gain control over Acc-Ross,” the regulator said in a statement in August 2010.
Single-stock futures give an investor the right to trade a contract based on an underlying share at a fixed price on a future date.
To contact the reporter on this story: Renee Bonorchis in Johannesburg at email@example.com