Old Mutual Plc said its South African private equity unit is considering increasing its 1.7% stake in Oceanic Bank Plc, one of 10 Nigerian banks bailed out by the Central Bank of Nigeria (CBN) last year.

Old Mutual’s buyout division “has been in discussions with various regulatory bodies, including the Central Bank of Nigeria, as well as potential strategic partners, about various initiatives in relation to its investment, including potentially increasing it,” Matthew Gregorowski, spokesman for London-based Old Mutual.

Oceanic’s CEO, Cecilia Ibru, was among eight CEOs fired by the CBN in August last year after it had to inject N620 billion ($4.1 billion) of capital into 10 of its 24 banks to cover bad debts. Nigeria is now wooing buyers to take stakes in the 10 troubled lenders.

“Discussions are confidential so we’re not at liberty to provide any further detail,” Gregorowski said. The buyout unit is part of Old Mutual Investment Group South Africa. “There is no guarantee that anything will come of these discussions.”

The buyout unit of Old Mutual, the largest insurer in Africa, and Johannesburg-based Ethos together paid $130 million for stock in Oceanic during an October 2007 share sale by the Lagos-based lender. They were each given a board seat, gaining a foothold in Nigeria, which is Africa’s largest oil producer and second-largest economy. Ethos has declined to provide the size of its stake.

South Africa’s largest banking groups, Standard Bank Group Ltd. and FirstRand Ltd., said last week they had registered with the Central Bank of Nigeria to conduct due diligence exercises with the distressed banks and choose whether to buy stakes.

The CBN said in October last year it will limit domestic banks’ market share to 20% and prevent the country’s biggest lenders from acquiring stakes in the 10 institutions that failed an audit earlier this year. Nigeria has also suffered political upheaval with President Umaru Yar’Adua being absent for two months.

“The Nigerian sector is absolutely still fraught with risks; the point is what price you pay and risk you take on as the market is still very attractive in the long term,” said Neville Chester, Banking Analyst and Portfolio Manager at Cape Town-based Coronation Fund Managers Ltd.

Ethos “does not discuss its intentions or actions on any of its deals publicly,” Ngalaah Chuphi, the company’s Head of Investor Relations, said.

Nigeria may overtake South Africa as the continent’s biggest economy by 2011, Renaissance Capital said on Sept. 8. Only about 16% of the country’s 150 million people have bank accounts, highlighting the potential for lending growth.

Old Mutual fell 2 cents, or 0.2%, to R13.13 as of 10:06 a.m. in Johannesburg, paring its gain over the past 12 months to 62%. The London-based insurer is the best-performing stock on the five-member FTSE/JSE Africa Life Assurance Index. Old Mutual, which was formed in Cape Town in 1845, owns a controlling stake in South Africa’s fourth-largest bank Nedbank Group Ltd.

Read more on Banking in Nigeria

Old Mutual | Oceanic Bank | Ethos Private Equity

Source(s): Bloomberg News