Indecisive govt policies cripple banks shares

L-R: Head, Premier Banking, Ecobank Nigeria, Korede Demola-Adeniyi; Executive Director, Ecobank Nigeria, Kingsley Umadia, Executive Vice President, Business Development and Global Product, MoneyGram, Alexander Hoofmann,  and Regional Manager, Anglophone, West Africa, Kemi Okusanya,  at the commencement of "MoneyGram Send" services in Ecobank branches last week in Lagos. 

By Kayode Tokede

Share price of 14 listed Deposit Money Banks (DBMs) on the Nigerian Stock Exchange (NSE) stumbled in June as indecisive government policies signal profit-taking.

The new administration under the leadership of President Muhammadu Buhari unclear economy policies on a wave of hope had deepened the capital market sentiment trading most especially from the Foreign Portfolio Investment.

Also, the dwindling global oil prices, Central bank of Nigeria (CBN) harmonization of the Cash Reserve Ratio (CRR) on public and private sector deposits at 31 per cent and possible devaluation of Naira had created fear and uncertainty as investors hurriedly drop shares.

With the exception of Ecobank Transnational Incorporated, all equities in the banking subsector recorded declined.

The share price of Ecobank Transnational Incorporated gained 4.5 per cent from N21. 53 when the market opened in June to close the same month at N22.50.

Top losers in the banking subsector according to our correspondent investigation revealed that FBN Holdings Plc, parent company of First Bank of Nigeria Limited recorded the highest decline of 15.35 per cent from N9.38 to N7.94.

Skye Bank Plc was down by 13.09per cent from N2.75 to N2.39, Unity Bank Plc fell by 12.6 per cent to N2.50 as against N2.86 it opened in June, Fidelity Bank Plc lost 10.88 per cent to N1.72, while Zenith International Bank Plc   declined by 10.21 per cent from N21.44 to N19.25 per share.

Following the decline, Stanbic IBTC Holdings Plc shed 9.70per cent from N29.90 to N27.00, Access Bank Of Nigeria Plc lost 9.31 per cent from N6.23 to N5.65, while United Bank For Africa Plc was down by 7.59 per cent or N0.41 from N5.40 to N4.99.

Also, Guaranty Trust Bank Plc fell by 6.70 per cent from N28.95 to N27.01, while Sterling Bank Plc and Union Bank Of Nigeria Plc declined by 5.21 per cent and 3.26 per cent to N2.00 and N9.79 respectively.

FCMB Group Plc, a parent company of First City Monument Bank Limited, was down by 2.91 per cent from N3.09 to N3.00, while Wema Bank Plc fell by 2.08 per cent to N0.94 compared with N0.96 it opened in June.

Diamond Bank Plc had witnessed the weakest drop in June, shedding 1.35 per cent from N4.45 to N4.39

A review of the sectoral indices also showed that the NSE Banking Index recorded the biggest loss for the month as it fell by six cent to close at 368.29 basis points in June  from 391.92 basis points it opened the month under review.

Analysts had attributed the decline in banks shares to macro-economy challenges that is even contributing to some states government inability to pay salary among others factors.

The Chief Executive Officer, Finawell Capital Limited, Mr. Babatunde Oyekunle, said the severe macro-economy challenges is expected to erode banks shares on the capital market.

He said, “the economy since President Muhammadu Buhari resumed office has not been vibrant. The excess crude oil account is down and nothing is happening in the economy-there is no way it will not affect financial institutions.

“The stagnancy in the economy is affecting the banking share prices and that is why investors are taking profits.”

He explained that since some state government are not paying salaries and contractors are not been paid, “All these contributed to the banks shares decline,” he added.

The Chief Executive Officer, Mr. David Adonri, expressed that the struggling situation in the oil/gas sector is expected to affect listed financial institutions.  

Adonri explained that the banking sector exposure to the oil/gas sector and indecisive policy in that sector is expected to erode bank profit in half year results.

He said, “If anything happens in the oil/gas sector, it is expected to affect the banking sector.

“The foreign exchange market is also in distressed and speculation that the CBN might devalue the Naira further has created sentiment trading across the capital market,” he added.

Analysts from FBN capital Limited, a Lagos based research company noted that the largest challenge faced by the country is not fiscal but institutional (the willingness of the legislature and the executive.

The Naira was, twice devalued in th2014 as CBN attempt to cope with lower oil income from the oil/gas, and it has weakened 7.7 per cent against the dollar this year on the interbank market.

The International Monetary Fund (IMF) has estimated that growth will slow to 4.8 per cent this year from 6.1 per cent in 2014. The naira was trading at N198.85 against the U.S. dollar as at last week Friday.