HSBC ends pursuit of Nedbank

Banking giant HSBC has called off plans to buy a controlling stake in South Africa’s fourth largest bank, it was revealed today.

The group ended takeover talks worth a reported £5bn (€5.7bn) with Old Mutual over its 70% stake in Nedbank ahead of this weekend’s deadline for the completion of a two-month period of exclusive discussions.

HSBC said negotiations had “not successfully concluded and have ended”, although it stressed the group remained committed to growing its business in South Africa.

It is thought due diligence proved more complex than HSBC expected.

Old Mutual said HSBC had not made clear its reasons for withdrawing, but stressed it did not believe the decision related to any adverse findings made during due diligence.

Nedbank is one of the largest financial groups in South Africa and has links with banks in 30 countries across the continent.

HSBC’s exit leaves open the possibility that other bidders will come in for Nedbank, including its UK rival Standard Chartered, which is said to have lost out to HSBC in the latest round of talks.

However, Standard Chartered only this week announced plans to tap shareholders for £3.3bn (€3.75bn) primarily to beef up its balance sheet ahead of incoming capital rules.

Old Mutual – based in South Africa and listed on the London Stock Exchange – is understood to have received a number of approaches for its Nedbank holding in recent years, which foreign banks could use as a platform on which to build a business across the continent.

It said it would now consider its other options regarding the Nedbank stake.

Bruce Packard, financial analyst at Seymour Pierce, said it would be unlikely that Standard Chartered would step in after this week’s fundraising move.

“We would be surprised if they did bid given the reason for the rights issue was all the capital uncertainty around Basel III,” he said.

Old Mutual shares dropped 6% today as investors digested news of the deal blow.