By Udeme Ekwere

Monday, 18 Oct 2010

Investors in the Nigerian capital market have gained N320bn in the last two weeks.

This follows the ruling by a Federal High Court in Lagos that the former Managing Director, Oceanic Bank Plc, Mrs. Cecilia Ibru, should forfeit about N191bn assets to the Federal Government.

The market capitalisation of the 199 listed equities, which had closed at N5.825tn on October 8, 2010, rose by 5.5 per cent to close at N6.145tn on Friday, translating into a N320bn gain for investors in the two-week period.

Similarly, the Nigerian Stock Exchange‘s All-Share Index closed at 25,077.73 points, representing an increase of 5.5 per cent or 1,305.33 points, up from 23,772.40 points recorded two weeks ago.

Large trading in banks’ shares, especially those of the rescued banks, accounted for the significant rise in indices, with some of them rising by as high as 26 per cent in the period under review.

The rescued banks are Intercontinental Bank Plc, Oceanic Bank International Plc, Union Bank of Nigeria Plc, Bank PHB Plc, Spring Bank Plc, Wema Bank Plc, Unity Bank Plc, Afribank Nigeria Plc and Finbank Plc.

For instance, the share price of Oceanic Bank, which had closed at N1.16 prior to the jail term pronouncement on the former managing director, increased by 25 per cent or 29 kobo to close at N1.45 per share.

Intercontinental Bank’s shares rose by 26 per cent or 32 kobo from N1.23 to N1.55, while Union Bank Plc rose by 14 per cent, from N3.52 to close at N4.03 in the period under review.

In the same period, Bank PHB Plc and Unity Bank Plc rose by 24 per cent each to close N1.22 and 98 kobo per share respectively.

The increase has been attributed mainly to the renewed confidence of investors in the banking sub-sector. The investors have been taking positions in anticipation of better things to come in the sub-sector.

The Central Bank of Nigeria had announced on Thursday, that about five or six of the banks rescued in a $4bn bail-out last year, would announce negotiations with potential investors in the coming weeks,

The CBN Governor, Mr. Lamido Sanusi, said, “In the next two to three weeks, you will hear announcements from five or six institutions about negotiations on registered acquisitions.”

He said that in August, the CBN had received bids for four of the rescued banks and that foreign institutions were involved in the bidding process, as well as several local banks and private equity firms in partnership with foreign banks.

According to analysts, it appears that the ongoing negotiations with potential investors on the recapitalisation of the rescued banks and the coming on stream of the Asset Management Corporation of Nigeria have boosted the confidence of investors in bank shares.

The Chief Responsibility Officer, Value Investing Limited, Mr. Seye Adetunmbi, noted that with the recent happenings in the banking sector and the expected take-off of AMCON, investors had shown renewed interest in banks’ shares.

According to him, ”One cannot rule out the anticipated effect of AMCON. Some of the banks have been brought on the path of good standing with the intervention of the CBN-appointed new managements. It is also clear that position is being taken by investors before the prices go beyond what fundamentals can support.”

Analysts from Meristem Securities said that the imminent public disclosure of the merger and acquisition bids by the CBN-managed banks and the expected purchase of their toxic assets by AMCON had redirected the interest of investors to the banks.

They said, ”The acquisition talks have triggered speculation on Oceanic Bank, Intercontinental Bank and their peers, as investors take advantage of better market pricing from favourable sentiments of investors to feature on the top gainers‘ chart.

“This is reminiscent of the trend witnessed a couple of months back when market grapevines on the merger flooded the market. This time, it is, however, different as the momentum is stronger on the heels of the bid nearing consummation.”

Source: Punch