* Absa says Nedbank engaged in “reckless lending”
* Nedbank says will defend legal action
JOHANNESBURG Jan 12 (Reuters) – South African bank
Absa is suing domestic rival Nedbank for $95 million to recoup
losses relating to the trading of single stock futures (SSFs) in
property firm Pinnacle Point, court papers showed on Wednesday.
Absa, majority owned by Barclays, was
forced in 2009 to buy stakes in four Johannesburg-listed firms
— including Pinnacle — for 1.4 billion rand ($172 million)
after clients defaulted on payments related to SSF contracts.
An SSF is a leveraged contract to buy shares in a company at
a set price in future. When stock prices fall, investors may
struggle to meet widening margin payments.
Nedbank bought shares in Pinnacle (then called
Acc-Ross Holdings) and sold futures contracts based on these to
Cortex Derivative Brokers, which had named Absa as underwriter.
Absa said in court papers Nedbank must have known Cortex
would default on margin payments related to the SSFs but chose
to overlook its creditworthiness.
“We cannot be held responsible for other parties’ losses
suffered as a result of a decline in the share price of Pinnacle
Point. We will defend ourselves,” said Brian Kennedy, managing
director of Nedbank Capital.
The Johannesburg Stock Exchange is the biggest SSF market in
the world by volume, although in value terms it is much smaller
than several others including India’s national stock exchange
and the Eurex derivatives exchange.
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