Old Mutual to boost ailing Nedcor

Old Mutual provided Nedcor with a loan in December

South African insurer Old Mutual has said it is upping its stake in the troubled banking unit Nedcor, as it reported a drop in profits.

The country's largest insurer said it would buy up to 2.5bn rand (£200m) worth of shares in Nedcor's 5bn rand rights issue this year.

Nedcor's recent losses have weighed heavily on Old Mutual.

The banking unit's troubles helped to drag Old Mutual's annual operating profit down 10% to £650m.

Loan

Nedcor has suffered a downturn due to problems including poor trading, book-keeping adjustments and its merger with Cape Town's BoE bank.

Old Mutual has underwritten a 76% chunk of Nedcor's issue, along with Merrill Lynch and Deutsche Bank.

Nedcor was forced to accept a £155m loan from Old Mutual in December.

Old Mutual's shares in Johannesburg dropped by 3% in early trade on Monday.