Nedbank Rules Out Special Dividend as It Eyes East Africa

Nedbank Group Ltd., the South African lender with a 20 percent stake in a West African bank, said it’s not considering a special dividend, preferring to seek expansion in the continent’s East and sub-Saharan regions.

Even with capital adequacy ratios above regulatory requirements, “we’re not contemplating a special dividend,” Mike Brown, chief executive officer of the Johannesburg-based bank, said in an interview with Bloomberg TV Africa on Oct. 27. “Our preferred use of surplus cash is for organic growth and strategic acquisitions. In southern and East Africa we want to build the Nedbank brand.”

Nedbank already operates in Swaziland, Lesotho, Namibia, Zimbabwe and Malawi and bought a stake in a Mozambican lender earlier this year. It gained a 20 percent stake in Togo’s Ecobank Transnational Inc., Africa’s most geographically diverse lender, on Oct. 2. Nedbank’s parent company, Old Mutual Plc, is also targeting East Africa, buying micro lender Faulu Kenya Ltd. in 2013 as that economy grows more than 5 percent a year.

While the lender’s primary focus will be on bedding down this year’s acquisitions, “we will continue to look at where there are sensible opportunities to expand Nedbank,” Brown said. “We will reduce our dividend cover to the middle of our target levels which is between 1.75 to 2.25, so there is still scope to grow dividends faster than earnings.”

Nedbank’s common equity tier 1 capital adequacy ratio, which is a measure of how much money a bank is holding against its liabilities, is estimated by the lender to be 11.3 percent after the Ecobank transaction. That’s above the 5.5 percent regulatory minimum and within Nedbank’s own target range.

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