New Telegraph

NSE investors lose N211bn in November

Shareholders of banks quoted on the main board and premium board of the nation’s stock market reported a cumulative loss of about N211 billion during the month of November 2021, following profit takings witnessed in the sector during the month.

 

Checks by Sunday Telegraph revealed that the stocks recorded loss of N211 billion or 7.64 per cent to close at N2.549 trillion in market capitalisation on the last trading day of the month as against opening figure of N2.760 trillion at the beginning of trading on November 1, 2021.

 

According to Cowry Research: “We expect the local stock market index to trade sideways as investors turn some of their shareholdings to cash ahead of the Yuletide season.

 

Nevertheless, we feel this move would create ample opportunity for medium to long-term investors to buy cheaply” The implementation of the BASEL III guidelines in November 2021 is expected to have implications for banks in terms of a tradeoff between having solid capital base and dividend payouts, high liquidity and strong margins and loan growth.

 

The Group Managing Director, Afrinvest West Africa, Ike Chioke, who stated this recently in Afrinvest’s 2021 Nigerian Banking Sector Report themed ‘Resilience Amidst Endemic and Pandemic Constraints’ noted that, “it is our view that the guideline would help in controlling liquidity, make banks stronger and more resilient during period of stress given that it addresses issues on minimum liquidity coverage ratio (LCR), capital adequacy and system risk”.

 

Chioke noted that for banks to comply with the LCR criteria, banks would have to hold higher liquid assets while decreasing proportion of long -term debts. “This will hinder banks’ ability to create higher margins over the long-term.

 

The implementation of Basel III requires a stronger and higher Tier-1 capital to absorb unanticipated shocks.

 

“To this end, we expect banks with weaker Teir-1 capital levels to increase retained earnings as current environment is not very supportive of equity raise combined with the already elevated issued share capital of most banks “Broadly speaking, it is safe to conclude that the Nigerian banking sector remained resilient in the face of COVID-19 and several regulatory headwinds.

 

“Nevertheless, banks’ earnings and asset quality have taken a beating while being under pressure from competition. Also, the pandemic has provided learning points for players in the sector to reshape and reimagine their product/services offerings for longterm growth and sustainability.

 

“As the broader economy recovers, regulators are expected to relax the support given to the financial system which might affect some segments of the bank’s business. The banking sector faces a continuous period of uncertainty, and the resilience of the sector would depend on players’ response to new developments,” he said.

 

Chioke noted that with the pandemic, the Nigerian Banking sector vulnerability heightened which required swift policy responses from the CBN. “Consequently, the CBN rolled out stimulus packages to critical sectors with significant loan exposure, reduced interest rate on intervention facilities (from 9.0 per cent to 5.0 per cent) and granted banks the forbearance to restructure loan exposure.

 

As a result, real GDP growth in the financial institutions sector grew by 13.3 per cent y/y. “Nonetheless, the sector’s earnings and profitability slowed in 2020, hurt by the stringent implementation of the CRR policy (27.5%) which effectively sits at north of 50.0% for some banks due to CBN’s non-refund policy and the discretionary excess debits.

 

“In addition, the low interest rate environment in H2:2020 and H1:2021 drove weak yield on assets for the sector despite the drive to expand asset base.

 

These factors coupled with deposits reduction in both consumer and business segments, exposure to currency risk and increased credit default, affected Nigerian bank’s profitability.

 

“Consequently, aggregate gross earnings for the banks within Afrinvest’s coverage (5 Tier-1 and 8 Tier-2 Banks) marginally grew by 2.8 per cent in 2020 relative to 9.9 per cent in 2019.

 

Meanwhile, earnings weakened as the industry’s PBT fell 2.3% from a growth of 13.2% in 2019 while PAT slightly grew by 0.4% y/y compared to 13.1 per cent in 2019,” he said.

Read Previous

Firm unveils N3.5bn automobile factory in Abuja

Read Next

ISWAP attack injures 6-monthold baby in Maiduguri

Leave a Reply

Your email address will not be published. Required fields are marked *