South Africa’s Nedbank booked a $293 million writedown on the value of its stake in sub-Saharan lender Ecobank on Tuesday and reported its slowest growth in annual profit since 2009.
Ecobank Transnational Incorporation’s operations in central and west Africa are exposed to some economies that have been pressured by the commodity price slide and unfavourable currency swings since Nedbank bought a 20 percent stake for $500 million in 2014.
The writedown reduced Ecobank’s value on Nedbank’s books to 4 billion rand ($308 million) from 7.8 billion rand, Reuters quoted the South African lender to have said in a statement.
Nedbank said, however, that Ecobank remained vital to its expansion elsewhere on the African continent, where Ecobank has operations in nearly 40 countries outside its home market.
“It’s obvious that we would be disappointed with the performance of our Ecobank investment to date,” Nedbank Chief Executive Mike Brown told reporters.
“But we still, however, remain optimistic on the long-term growth prospects in the rest of Africa.”
Brown forecast another tough year for Ecobank, which makes the bulk of its earnings in Nigeria, before improving in 2018 and beyond.
Shares in Nedbank were little changed at 244 rand at 1300 GMT, more than 40 percent below where they should trade based on the most likely earnings trajectory, according to Thomson Reuters StarMine intrinsic valuation model.