By Peter OBIORA investadvocate

Nov 10 2010 06.20 GMT

Lagos (INVESTADVOCATE)-Market Operators believe that the conviction of Mrs. Cecilia Ibru, erstwhile Managing Director/Chief Executive Officer (MD/CEO) of Oceanic Bank International Plc (Oceanic) is boosting the rescued Banks stocks.

 

Gbenga Obisesan, a Dealing Member and MD/CEO of Topmost Securities Limited, a Stockbroking firm made this affirmation to investadvocate Tuesday November 09 2010 at the Floor of the NSE in Lagos Nigeria.

 

The Dealing Member affirmed that the positive growth in the prices of the rescued banks is related to the conviction of Mrs. Ibru, by a Federal High Court in Lagos for mismanagement of the bank and fraudulent practices.

 

“For the fact that Cecilia Ibru former Oceanic Bank MD has been sentenced to jail and about N191.4 billion worth of Assets is coming back to Bank either through AMCON or directly; that means the issue of whatever is causing the downward trend of the Bank’s shares has stopped” he said.

 

Obisesan further affirmed that the Nation’s Capital Market (NCM) believe that the fate of Mrs. Ibru or Oceanic Bank will happen to the other rescued Banks by the Central Bank of Nigeria (CBN).

 

“The believe of the Market is that the same thing that happened to Mrs. Ibru or Oceanic Bank will happen to other rescued Banks” the Dealing Member said.

 

According to him, investors are scrambling for positions in the Market; especially the rescued Banks; “because that very week when Oceanic Bank had its problem, the Bank’s shares became scarce in the Market” he said.

 

“As at Monday November 08 2010, investors started taking profit on what had happened; but today, it is a different decision entirely; because AMCON has now come out with their time table of how to take all the Toxic Assets off the Banks; they are going to take all those shares at a pre-determined price; so people are now buying ahead of AMCON; because if the Asset Management Company pick those shares, they are not going to release them to the Market. They will warehouse them maybe until a particular time. So those who have them now can make money by selling when the Market is good” Obisesan said.

 

He also affirmed that some of the Banks have been calling on Stockbrokers who took margin loans with them to reach an agreement on the way forward.

 

Obisesan again noted that is not mandatory for organisations approach to AMCON for a bailout.

 

“It is not a force that people must go to AMCON; so Banks can decide to hold back; if the prices will appreciate in future, then it will be wise for them to hold on to the shares and sell at the appropriate time” he said.

 

The Dealing Member further affirmed that going to the Asset Management Company may be a thing of option. “I believe going to AMCON will be optional; but for those Banks who are desperate, they can go to AMCON immediately and negotiate” he said.

 

“For instance, if the Banks are holding 100 million units and if they are cash strapped, they can sell about 10 million units and get some cash” Obisesan said.

 

Only on Monday November 08 2010 that the Board of AMCON in Abuja Nigeria concluded its first board meeting, during which it reiterated their mission to acquire non-performing loans across the banking industry, recapitalise the rescued banks and manage the acquired assets.

 

The Board of AMCON at the meeting affirmed that they have approved and are ready to purchase all the margin loans in the banking sector and all the non-performing loans of the rescued banks, both totaling in excess of N2.2trillion.

 

According to the Board of AMCON, the valuation methodology that has been agreed with the Honourable Minister of Finance, the Governor of the Central Bank of Nigeria (CBN) and the Banks will be based on first for non-performing loans (NPLs) backed by shares of listed companies, “AMCON will value the loans at an implied premium of approximately 60% on the 60-day average of recent prices ending November 15^th 2010” the Asset Management Company said.

 

“The underlying assumption is that a fair value to ascribe for the purposes of buying the NPLs would be two times book value and this premium approximates that value.   It should be noted that this valuation is solely for the purpose of buying the NPLs and not for recapitalisation of the banks” it said.

 

    Also, for non-performing loans (NPLs) backed by other perfected collateral, AMCON will accept the most current estimate of the loan value supplied by the institution.

 

   “The estimate must be based on current market analysis of the collateral and a written guarantee of good faith by the institution. Additionally, there must be a post-transaction adjustment agreement that allows AMCON to independently value the loan as of the transaction date of November 15^th2010” the Board of AMCON said.

 

    The Board of AMCON said that all unsecured loans or loans with ineligible collateral will be valued by AMCON at 5% of the principal value.

 

Again, it is expected that AMCON will reach agreements with the selling institutions regarding pricing of the NPLs by November 15^th, 2010, and aims to settle these transactions on or before December 30^th, 2010.

 

“This will allow the institutions to obtain the necessary Board and Shareholders approval, whilst also giving AMCON the time to establish the necessary operational structures to settle these purchases” the Board disclosed.

 

AMCON said that these transactions constitute an important first step and would be addressing the issues of recapitalisation and the purchase of non-performing loans across all banks in the near future.

 

In a review of the performance of the rescued Banks in the market, since the beginning of the month of November 2010 shows that the share price of Oceanic Bank has grown from 11 Kobo it gained since the beginning of November 01 2010 to 14 Kobo on Tuesday November 09 2010; indicating a growth of 3 kobo in the review period.

 

While Afribank Nigeria Plc has gained between 10 Kobo from November 01 2010 to its loss of 13 Kobo as at Tuesday November 09 2010.

 

Intercontinental Bank Plc has gained between 11 Kobo as at November 01 2010 to 12 Kobo as at November 09 2010.

 

On its part, Union Bank of Nigeria Plc (UBN) share price as at Monday November 01 2010 was 3 Kobo compared to 22 Kobo it stood as at Tuesday November 09 2010.