Bank shares rallied last week as speculation of further job losses gained momentum in the banking sector. Intercontinental Bank Plc advanced for the first day in 13, adding 4.6 per cent to close at N1.36 at the end of trading on Wednesday. The bank had announced the sack of 1,339 staff on December 18. The shares had declined 89 per cent this year.
Shares in Oceanic Bank International Plc, which had fallen 87 per cent in 2009, posted its steepest two-day rise in more than a month and advanced 4.5 per cent to close at N1.4. The bank reportedly fired 1,500 employees.
The banks led a gain of as much as 1.7 per cent in the Nigerian Stock Exchange’s Banking Index, its biggest intra-day rise since November 11. The index has lost 37 percent this year and closed 0.6 per cent higher.
THISDAY checks showed that unlike the situation last month, the share prices of most of the banks were traded well above the N1 mark except for Finbank, Spring Bank, Unity Bank and Wema Bank which were traded at 50kobo, 87kobo, 84 kobo and 78 kobo respectively on Wednesday.
“The only thing banks can do is look at their cost structures” since revenue isn’t growing, Chief executive officer of Financial Derivatives and a member of the committee set up by the government to advise it on Nigeria’s response to the global financial crisis, Bismarck Rewane, told Bloomberg on phone.. “It’s a welcome development. They have to reduce costs.”
The dismissals form part of a shake-up following an audit by the Central Bank of Nigeria in August and September, which resulted in Governor Lamido Sanusi firing chief executives of both banks and six others and injecting at least N620 billion ($4.12 billion) into 10 banks, including Intercontinental and Oceanic, to boost their capital and liquidity.
Nigeria’s All-Share index, the second-worst performer of 90 benchmark equity indexes on Bloomberg this year after Ghana’s, plunged 34 per cent in 2009 and 46 per cent last year. Banks dragged the index down on concern they may have as much as $10 billion of toxic assets, according to data in May from Eurasia Group, a New York-based research company.
As much as two thirds of the bad debt is the result of at least N1 trillion of margin loans used to buy equities as they soared almost 13-fold since 2000.
Fidelity Bank headed for its highest close in two weeks, climbing 3.2 per cent to N2.58 on Tuesday but slide to N250 on Wednesday after shareholders approved a N200 billion- ($1.3 billion) bond sale on December 21. First City shareholders gave permission for the lender to raise N100 billion through a bond sale on December 16, company spokesman Tunde Shofowora said by phone in Lagos last week. The shares increased for the first day in four, adding 3.7 per cent to N7.19.
The two lenders are following the nation’s four biggest by raising funds through debt sales. First Bank of Nigeria Plc will issue N500 billion in bonds after shareholders approved the sale on October 8. Zenith Bank Ltd, will raise N300 billion following approval at a meeting on October. 30.
Guaranty Trust Bank Plc, the third-biggest, started a five- year, naira-denominated bond issue on December 9, while United Bank for Africa Plc, received the go-ahead to raise N500 billion through a bond sale on October 2.
The Nigerian bank shake-up may create opportunities for buyers. Standard Bank Group Ltd., Africa’s largest lender, is looking at Nigeria for possible acquisition opportunities since the banking crisis slashed valuations, Johannesburg-based spokesman Eric Larsen said on December 15.
Old Mutual Plc, the biggest insurer on the continent, seeks to follow smaller rivals such as Liberty Holdings Ltd. and FirstRand Ltd. into Africa, including Nigeria, to boost growth and make up for losses in its U.S. business.