Following the positive trend recorded by non intervened banks, shares of the seven rescued banks at the Nigerian Stock Exchange have shown significant improvement since the beginning of the year.
However, while the total market capitalisation has grown by 7.59 per cent from N7.91 trillion at the beginning of the year to 8.51 trillion as at the close of trading on Friday, shares of some of the rescued banks doubled during the review period.
From January 4th to February 17th, the share prices of all the seven rescued banks recorded growth within the range of one to 100 per cent; while the healthier banks rose by an average of 10 to 40 per cent.
Spring Bank recorded the highest growth by 100 per cent; Finbank rose by 33 per cent increase; BankPHB grew by 12 per cent; Afribank followed with 14 per cent increase; while Oceanic Bank and Intercontinental Bank recorded increase of 9 per cent and 12 per cent, respectively. However, Union Bank was the least gainer with one per cent growth.
Dimeji Akintayo, an equity analyst at Resource Cap, a portfolio management firm, said the performance of the banking sector generally showed that “both local and foreign investors are beginning to have confidence in the industry following the various reform programmes by the Central Bank.”
“The rescued banks especially are attracting the attention of some foreign investors because they understand that the government has taken steps to stabilise their operations,” Mr. Akintayo said.
Boniface Okezie, the national chairman of the Progressive Shareholders Association of Nigeria, said while other rescued banks’ shares are becoming the toast of investors, “the recent crisis in Union Bank may discourage some investors from investing in the bank’s stock.”
The banking crisis started over a year ago, when the Central Bank sacked the former chief executive officers and top managements of the seven banks for various misdemeanor. The banks’ heads were immediately replaced with new ones. The intervention, and the stringent regulatory control by the Central Bank of Nigeria led to crash in the price of banking stock, a trend that reverberated throughout the market.
Asset Management
Asset and Resource Management Company (ARM), a fund management firm, in its first quarter report, said the creation of the Asset Management Company of Nigeria (AMCON) was key to the recent attraction by some investors in the shares of rescued banks because “AMCON was eagerly anticipated by both investors and the banking system.”
The report said although the recovery in the banking sector from the depression of the last two years was generally slow, it was steady.
“Key indicators of performance and stability are showing signs of improvement across the sector. Of course, this has largely been made possible by the forbearance of the Central Bank. The regulatory body has not only kept all rescued banks alive until now, but has also prevented the situation in the healthy banks, especially the marginal ones, from deteriorating,” the report further said.
However, ARM said while provisioning moderated significantly within the industry aftermath, the crisis “profitability fell short of our expectations. In fact, for a number of banks, write-backs have constituted a significant portion of total profits so far in 2010,” adding that “for the rescued banks, even if the full face value of the AMCON bonds fully impacts balance sheets, most will retain a negative equity position.”
It said significant lending is impossible for the rescued banks without further recapitalisation and attendant dilution of equity.
