HSBC walks away from £5bn bank deal in South Africa

Standard Chartered was tonight playing down suggestions that it was interested in bidding for South Africa's Nedbank after HSBC pulled out of talks hours before an exclusive deadline for negotiations expired. The decision by HSBC to withdraw its potential £4.5bn offer for Nedbank – after two months of access to confidential information – hammered shares in the South African bank as well as those of its majority shareholder, Old Mutual, which has been keen to sell its stake . Nedbank slumped 8% while Old Mutual, which has a listing in London, was the biggest faller in the FTSE100. Old Mutual lost nearly 5% amid fears that it would find it difficult to attract interest from bidders prepared to help reduce its 55% stake. HSBC gave no explanation for the decision to end talks on buying up to 70% of Nedbank other than to say the decisions "have not been successfully concluded". The bank declined to comment further but sources tried to play down suggestions that the reshuffle under which chairman Stephen Green and chief executive Mike Geoghegan are both being replaced had influenced the decisions. Analysts concluded that HSBC had been scared off by potentially risky loans held by Nedbank, although there were suggestions that pulling out of talks could be a negotiating tactic to push down the price on a business that would have been crucial to HSBC's expansion plans in the fast-growing South African market. The City of London had regarded Standard Chartered as the only other serious contender for Nedbank but, just days after a £3.3bn cash call to bolster its balance sheet, the bank insisted it was unlikely to step into the fray. Under the terms of the rights issue, the cash must be used to boost Standard Chartered's capital cushion, not to help fund a potential deal. When the rights issue was announced, finance director Richard Meddings told the Guardian that he was not building a "war chest" to fund deals. While shareholders will be relieved that HSBC is not taking on too much risk, or overpaying, by buying Nedbank, the bank will now face questions about how it plans to achieve its goal of expanding in South Africa. "HSBC have made a strategic statement saying they are going to get involved in Africa, but I don't know how now," Rob Nagel, senior portfolio manager at Cadiz Asset Management told Reuters.