By Babajide Komolafe, Peter Egwuatu and Micheal Eboh
The five troubled banks whose chief executives were sacked by the Central Bank of Nigeria (CBN) in the first phase of banksâ€™ audit have regained the confidence of investors in the capital market.
Analysis of transactions of on the floor of the Nigeria Stock Exchange (NSE) indicate that the share prices of the five banks namely Intercontinental Bank PLC, Union Bank PLC, Afribank PLC, Oceanic International Bank PLC and Finbank PLC, have risen steadily for two weeks . On the average the share prices of the banks has risen by 27.16% from September 25 to October 9. Afribank recorded a share price rose by 29.87 per cent, Finbank Plcâ€™s shares rose by 26 per cent, Oceanic bank shares rose by 50.18 per cent and Union Bank shares rose by 33.92 per cent. Intercontinental Bankâ€™s shares initially rose by 3.33 per cent before declining by 4.18 per cent.
The steady rise in the share price of these banks coming after three weeks of steady decline during they fell by 42.94% on the average, indicate that the banks have regained the confidence of investors in the market.
It would be recalled that on August 14, the CBN sacked the chief executives and executive directors of the five banks due citing high level of non-performing loans in the five banks which was attributable to poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the banksâ€™ credit risk management practices. The affected chief executives are Mr, Sebastin Adigwe (Afribank), Mr. Okey Nwosu (Finbank), Dr. Erastus Akingbola (Intercontinental Bank), Dr. (Mrs.) Cecilia Ibru (Oceanic Bank), and Dr. Bath Ebong. The apex bank also announced the appointment of new chief executives for the five banks namely Mr. John Aboh – MD/CEO Oceanic International Bank Plc, Mr. Mahmud L. Alabi- MD/CEO Intercontinental Bank Plc, Mrs. Suzanne Iroche- MD/CEO Finbank Plc, Mrs. Funke Osibodu – MD/CEO Union Bank Plc. In response the Nigeria Stock Exchange placed the shares of the banks on full suspension for two weeks.
The sacking of the CEOs, the revelation of the audit reported and utterances of the CBN governor which indicate the banks might be nationalized or sold to foreign investors jolted investorsâ€™ confidence in the banks and occasioned a mass of sell order on their shares. Consequently, their share prices declined steadily for three weeks after the suspension was lifted from September 4th to September 25th . During this period the share price of Intercontinental Bank fell by 49.02%, Union Bank 50 %, Afribank by 38.7 %, Oceanic Bank by 46.76% and Finbank by 34.2%. This trend however changed from the week ending October 2nd when the share price of the banks began to rise.
Market operators attributed the steady rise in the share price of the banks to renewed investor confidence bolstered by the assurances from the CBN on the status of the banks and also statements of the new chief executives officers of the banks.
This is renewed interest in the banks is reflected in the fact that the shares of the banks are being regularly traded on the floor of the exchange since the suspension was lifted. Analysis of daily share transactions revealed that the trading pattern of the banksâ€™ shares have been consistent with normal trading patterns. The only period when the volume of shares traded was unusually high was September 18 and 25th 2009.
On September 18th 41.5 million units of Oceanic Bankâ€™s shares were traded, 43.63 million units of Union Bankâ€™s shares were traded and 35.38 million units of Intercontinental Bankâ€™s shares were exchanged, while on September 25th 16.2 million units of Finbank Plc shares were traded. Except for these two days trading in the shares of the banks have been normal.
Mr. David Adonri, Managing Director, Lambeth Securities Limited, said stable pattern of transactions in the shares of the banks was due to renewed confidence on in the banks on the part of investors. Corroborating this, the Chief executive of a stock broking firm who spoke under condition of anonymity said, â€œThe fact that there have been transactions in the shares of these banks indicates there are willing buyers and this reflects investor confidence. It is not correct to say investors are dumping the shares of the banks like some are saying. This is because, for any transaction to be made, there must be a willing seller and a willing buyer. This means that for transaction to be recorded on a stock, it must have been offered by someone with another person taking it up. The question here becomes, if you claim that investors are dumping the shares due to uncertainty, who are the people buying and what their reasons for buying up these shares.â€
Further analysis reveals that 264.861 million units of the shares of the five banks have been traded since August 14th. 58.897 million shares of Afribank were traded; Finbank shares traded were 41.599 million while investors exchanged 35.194 million million shares of Intercontinental Bank. Oceanic bank shares traded were 90.332 million million, while for Union Bank it was 74.963 million shares.
Capital market operators told Vanguard that the implication of this development is that there money in the market and despite the turbulence investors still have confidence in the earning and profitability of the five banks hence willing to invest in them. They added that this means that the local market has the capacity to provide the fund needed for the recapitalization of the banks.