Banks’ market cap down N1.74trn since CBN announced recapitalisation plan

Commercial banks’ market capitalisation has depreciated by N1.74 trillion since the Central Bank of Nigeria (CBN) directed financial institutions to conduct a recapitalisation exercise.

On March 28, CBN announced an upward review of the minimum capital requirements for commercial, merchant and non-interest banks.

The apex bank said the increase was necessary due to prevailing macroeconomic challenges and headwinds occasioned by external and domestic shocks.

The upward review, according to CBN, will enhance banks’ resilience, solvency and capacity to continue to support the growth of the Nigerian economy.

CBN directed commercial banks with international licences to raise their capital base to N500 billion, while national and regional financial institutions were told to raise their capital bases to N200 billion and N50 billion, respectively.

Before CBN’s announcement, the banks’ all-share index (ASI) had appreciated from 894.20 ASI to 1,029.63 ASI between January 1 to March 28 — representing an increase of 15.14 percent.

ASI is used to measure how a market is performing, as it represents the share prices of companies on a stock exchange.

Since the announcement, TheCable Index observed that the banking index has declined by 21.55 percent between March 28 and April 16, compared to a 4.54 percent drop recorded by the Nigerian Exchange Limited (NGX), also known as the stock market, within the same period.

The banking index declined from 1,029.63 ASI to 807.65 ASI within the review period.

While the NGX index has dropped from 104,562.06 ASI to 99,808.34 ASI.

SHARE OF BANK THAT DOES NOT NEED TO RAISE CAPITAL APPRECIATES

TheCable observed all listed banks that fall short of the new minimum capital requirement recorded a decline in their market capitalisation aside from Ecobank.

Ecobank — the only financial institution that does not need to raise capital — is also the only lender to register an increase in its market value, notching N27.52 billion within the reviewed period.

This represents a 6.12 percent gain in the company’s market capitalisation, which rose from N449.56 billion to N477.08 billion.

Ecobank’s share price appreciated from N24.50 to N26.

INVESTORS ARE AVOIDING SHARE DILUTION

Charles Abuede, research lead, Cowry Asset Management Limited, said the decline reflects the impact of the directive by CBN.

Abuede said investors have not lost their faith in the banks, however, most investors are trying to avoid the situation of share dilution.

“The recent run of haircuts in the market and on the banking stocks is a reflection of the recent policy pronouncements of the regulatory authority of the banks. First it was the hawkish tone of the CBN amidst expanding inflation numbers and now the recent recapitalisation of the banks,” Abuede said.

“I think the market still has faith in the banks to raise the required capital but most investors are trying to avoid the situation of share dilution at the point when a tentative offer price for the capital raise will be announced by these firms or there is a situation of M&A or license downgrade in the recapitalisation drive.

“It’s a market-wide pullback and downbeat in investors sentiment towards banks that has bedevilled the market on a wider scale.”

BANKS THAT RECORDED DECLINE IN MARKET VALUATION

According to an analysis of trading activities on banks’ stocks — between March 28 and April 16 — 11 financial institutions listed below lost N1.74 trillion in market capitalisation.

GTCO

Guaranty Trust Holdings Company (GTCO) recorded the highest loss, as its market capitalisation dwindled by N462.06 billion or 29.90 percent within three weeks.

GTCO’s bourse valuation fell from N1.54 trillion to N1.08 trillion after the company’s share price dipped to N36.8, from N52.50.

FBN HOLDINGS

First Bank of Nigeria (FBN) Holdings recorded N369.72 billion decline in its market valuation following a 28.97 percent dip in the company’s share price.

FBN Holdings’ share price depreciated from N35.55 to N25.25.

This led to FBN Holdings dropping out of the NGX trillionaire stock list as the market capitalisation decreased from N1,27 trillion to N906.35 billion.

ZENITH BANK

During the review period, Zenith Bank’s share price depreciated by 20.44 percent — from N44.50 to N35.4.

In response, the market capitalisation of Zenith Bank declined by N285.7 billion, dropping from N1.39 trillion to N1.11 trillion.

ACCESS HOLDINGS

Within three weeks, Access Holdings lost N268.36 billion after its share price depreciated by 30.81 percent.

The share price had declined from N24.50 to N16.95, resulting in the market capitalisation decreasing from N870.85 billion to N602,49 billion.

UBA

Over N170.99 billion was wiped off from the market capitalisation of the United Bank for Africa (UBA) following a 17.85 percent dip in the company’s share price.

The share price had declined from N28 to N23.

The loss dragged UBA’s market value down from N957.58 billion to N786.58 billion.

FIDELITY BANK

The market value of Fidelity Bank dropped from N320.12 billion to N259.29 billion — representing a loss of N60.82 billion within the review period.

Fidelity Bank’s market capitalisation dropped following a 19 percent dip in the company’s share price, which depreciated from N10 to N8.1.

STANBIC IBTC

Data from the stock market showed Stanbic IBTC lost N45.34 billion during the period in review.

As a result, Stanbic IBTC’s market capitalisation reduced to N680.24 billion from N725.59 billion.

This followed a 6.25 percent decline in the company’s share price after it dropped from N56 to N52.5.

STERLING FINANCIAL HOLDINGS COMPANY

Sterling Financial Holdings Company recorded a loss of N34.54 billion in its market capitalisation as the lender’s share price depreciated by 22.22 percent.

According to trading data from NGX, Sterling Financial’s market value dwindled to N120.91 billion from N155.46 billion.

Likewise, the share price of Sterling Financial experienced a downward trend, moving from N5.40 to N4.2.

FCMB GROUP

Analysis of FCMB Group’s trading activities disclosed that N25.74 billion was wiped off the company’s market capitalisation.

The loss lowered FCMB Group’s value in the Nigerian bourse from N168.32 billion to N142.57 billion.

The dip was driven by a 15.29 percent decline in the financial institution’s share price after it depreciated from N8.50 to N7.20.

WEMA BANK

Wema Bank also saw its market capitalisation decline, with the company recording N16.71 billion loss following a 15.29 percent decline in its share price.

The share price depreciated from N8.50 to N7.2 — leading to the market value declining from N109.29 billion to N92.57 billion.

UNITY BANK

With a 6.28 percent decline in share price, Unity Bank’s market value dropped to N22.67 billion from N24.19 billion.

This indicates N1.51 billion was wiped off Unity Bank’s market capitalisation after the share price dropped from N2.07 to N1.96.