Diamond’s Atlas Mara Snared in Nigerian Banking Rout

  • Shares fall to record as concerns over Nigerian banks spread
  • Atlas Mara has lost 66% of its value since listing in 2013

Atlas Mara Ltd., the company co-founded by former Barclays Plc Chief Executive Officer Bob Diamond to buy lenders in Africa, fell to a record low as concern over the health of Nigeria’s banking industry spread.

Atlas Mara, which owns at least 21 percent of Lagos-based Union Bank Nigeria Plc, dropped for the fourth time in seven days in London trading on Wednesday. That mirrors declines among most Nigerian lenders after the central bank replaced the management of Skye Bank Plc on July 4 because of liquidity concerns. Since the intervention, Skye has plummeted 30 percent, while Union has decreased almost 10 percent.

Atlas Mara has lost 65 percent of its market value since the stock started trading in December 2013 as sliding commodity prices from oil to copper dimmed the outlook for the seven African countries in which the company owns assets. While Nigeria’s central bank moved to calm markets, saying last week that the industry remained healthy, analysts including Pabina Yinkere at Vetiva Capital Management Ltd. have said there are increased concerns that other banks may be hit in the aftermath.

“There’s a definite link between Atlas Mara and the Nigerian banking sector,” he said. “It’s the contagion. The Nigerian banking sector is taking strain. The negativity in the share price is linked to what we’re seeing in Nigerian banks.”

Loss of Value

Atlas Mara declined 0.7 percent to $3.80 in London, giving the company a market value of $265 million. UBN slipped 1.3 percent, falling for a fourth day to the lowest level since May 3.

The firm, founded by Diamond with Ugandan entrepreneur Ashish Thakkar after he resigned from Barclays, paid about $270 million to increase its stake in Union by 21 percent in September 2014. Union was among lenders bailed out by regulators as the central bank stopped the industry from collapsing amid a debt crisis in 2009.

Incorporated in the British Virgin Islands and with units in Zambia, Zimbabwe, Botswana and Rwanda, Atlas Mara in May reported a first-quarter loss and said full-year profit targets face “meaningful” challenges. At the end of June, Bradford Gibbs, an executive director who at one stage served as the company’s acting chief financial officer, resigned. 

Capital Risks

Union had a capital adequacy ratio of 15.4 percent at the end of the first quarter, compared with a minimum regulatory requirement of 15 percent, according to a presentation on the company’s website. Non-performing loans worsened to 6.9 percent compared with 6 percent a year earlier, while its liquidity ratio rose to 45 percent from 37 percent.

Diamond, 64, said in April that he and investors including U.S. private-equity giant Carlyle Group LP were working together on a possible deal to buy Barclays’s controlling stake in Johannesburg-based Barclays Africa Group Ltd., which has a market value equivalent to $8.5 billion. No formal bid has yet been announced.

The naira’s depreciation would have reduced Atlas Mara’s equity in Union Bank by at least 20 percent, if the currencies of the other six African countries where the company operates are held constant, said Robert Omotunde, head of investment research at Afrinvest Securities in Lagos.

“Although Nigerian banks are strong and Union Bank faces minimal threats in terms of non-performing loans and other systemic threats, digesting a double sentiment of weaker equity value and shaky company fundamentals may be too much for investors,” he said.

(Corrects to show financial results in May were for the first quarter in paragraph above Capital Risks sub-headline for story published on July 13.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE