August 16, 2011 / Proshare Research
ISSN 1597 - 8842 Vol. 1 No. 77
Noteworthy must be the defining role UBA Plc played in ensuring that this major directive was successful. UBA Plc was the “first” to respond to the tenure change of its erstwhile CEO; an information which it released to the market and general public within 48 hours after the CBN’s public pronouncement. The speedy response was a reassuring message for the investment community and was seen by analysts as a significant indicator of an organisation well prepared for, and able to adapt to change.
Second to respond, and by no means any less responsive was Zenith Bank Plc who in its characteristic value-based approach assured the market that it had always had in place a successor transition plan by announcing its Deputy Managing Director of many years as the successor. Skye Bank Plc, perhaps owing to the diverse nature of its shareholding took a while to respond and equally announced the Deputy Managing Director as the successor.
In all, the transition was not only smooth but did not cause any major shocks in the financial markets as the newly elected CEO’s were already functioning as or exposed to the office of a Deputy Managing Director at the time of change.
Interestingly, as the new CEO’s of Zenith Bank Plc, UBA Plc and Skye Bank Plc were completing their 100th day in office, they must have spent it concluding changes to parts, if not most of the business assumptions, strategy, model and markets as new banking model/regime established by the Central Bank of Nigeria (CBN) commenced on November 15, 2010. See an insightful analysis of what this portends to the banking industry - CBN upends 2005 Soludo-era banking reforms
A snapshot of how the CEO’s 100 days fared - based on their market price performance is presented in the table table below.
The share prices of the three banks were in negative positions 100 days before the new CEOs resumed. During their 100 days in office however, only Zenith Bank Plc recorded a positive outlook of 0.29% at close of the period. UBA Plc closed in the negative zone despite an impressive gain during the period while Skye Bank Plc dipped further into the red zone.
The Swings and Slides in the Banking Sector
The market performance of the three banks in the last one year reflected the unstable business environment in the banking sector as the three banks experienced near-similar trend with the banking index (which gauges the banking sector performance).
The three banks and the banking index recorded negative performance six (6) months after the new CEOs resumed office while they both recorded negative year to date (YTD) performances as at August 02, 2011.
This however, does not suggest that there are no individual contributory factors (like poor/good financial results) from the banks which have contributed to the performance recorded during this period.
A supplementary analysis however indicated that UBA Plc appears to have recorded the lowest performance against the banking index during this period i.e. lowest positive performance of 1.86% gain in six months after the new CEOs resumed office as against 14.74% upbeat recorded by the banking index.
This would appear unimpressive when compared with the sector average of 35.55% gain while Zenith Bank Plc and Skye Bank Plc recorded 12.47% and 26.75% gain respectively. The unfavourable results (-74.82% loss) declared by UBA Plc in its audited results might have had something to do with this outcome (in the absence of any other information).
Price & Volume Performance: The Year Before and After
A cursory analysis of price trend in the year before the three CEOs took over the management of the banks revealed that Skye Bank Plc recorded an impressive price appreciation of 20.00% gain - an outstanding performance when compared with -4.45% and -20.08% loss recorded by Zenith Bank Plc and UBA Plc respectively as market dipped by -0.20%.
A year after the new CEO’s resumed office however, UBA Plc sustained its negative performance, while Zenith Bank Plc and Skye Bank Plc reversed their previous performances.
Specifically, UBA Plc closed weaker at -48.19% loss as against -20.08% loss recorded before the new CEO while Skye bank Plc also dipped by -15.86% as against 20% gain recorded before the new CEO. The analysis revealed UBA Plc to be one of the worst performing stocks within this period under review (between August 2nd, 2010 and August 2nd, 2011).
Despite the general bearish market sentiments witnessed and the challenging atmosphere in the banking sector, we observed that Zenith Bank Plc erased the -4.45% loss recorded a year before the new CEO resumed office to close with 6.09% gain. Zenith Bank Plc was the top performing stock within the period under review.
Instructively, the liquid status of the stock contributed to this trend as buttressed by a total volume of 7.72 billion units traded within this period while Skye Bank and UBA Plc closed with volume traded of 1.50 billion and 4.00 billion units respectfully.
In our opinion, the results presented during the period under review aided the stock performance recorded as highlighted in the tables below. Conversely, the weak market fundamentals had impacted significantly on the stocks as ASI and BANKING INDEX dipped by -6.91% and -8.59% respectively.
However, the year-to-date performance of the three banks closed negative at -31.06%, -44.21% and -3.83% for Skye Bank, UBA Plc and Zenith Bank Plc respectively while the BANKING INDEX and ASI settled at -14.08% and -4.94% respectively.
Financial Result Performance Summary
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