Proposed Banking Sector Recapitalization: How prepared are the listed banks?

Must Read

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...

GTBank Extends Banking Hours Till 6pm

Guaranty Trust Bank, GTBank has announced the extension of its banking hours till 6 pm today, Monday, 20 January...

Top 10 Most Expensive Universities In Nigeria

For many Nigerians, high-quality higher education is a luxury. There are many private universities who are known not only...
- Advertisement -
- Advertisement -

Recently, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, unveiled his plan for the second term in the office. Among others, the CBN’s plan to recapitalize the banks was the major highlight of the speech and this brought back the memory of the 2004 banking sector recapitalization wherein the banking sector minimum capital base was revised up from N2.0bn to N25.0bn. Notably, the most rational basis for newly planned recapitalization can be linked to the drop in the value of the naira against the dollar (N100/$ in 2004 vs. N360/$ currently) which had weakened the current minimum capital base of banks in dollar terms from c. $250.0mn in 2004 to c. $69.4mn today.

Proposed Banking Sector Recapitalization: How prepared are the listed banks?
Source: Corporate Financials, United Capital Research

In our analysis, for the CBN to restore the capital base to c.$250.0mn, the dollar equivalent in 2004, the monetary authority will need to revise upward the current capital base from N25.0bn to at least N90.0bn ($250mn at N360/$). Certainly, most of the listed banks are in a good position to withstand a recapitalization exercise, if the exercise is merely to reflect the current exchange rate environment.

Read:  Daily Insight: Stock Market Downturn: A Classic Case of “Sell in May & Go Away”?
Read:  Daily Insight: Nigeria’s Balance of Payment in Q1-18; frailly stable?

However, Unity Bank and Wema Bank will need to shore-up their shareholders’ fund which is below N90.0bn. Sterling Bank is just some level above the estimated N90.0bn. Also, unlisted players such as Keystone, Polaris and Heritage may be affected. Overall, we believe the newer or recently licensed banks will feel the heat the most.

 

United Capital Plc Research (UCR)

- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

Novel Coronavirus: Lagos alerts public, lists precautionary measures

…Says No Case Of Virus Reported In Nigeria The Lagos State Government has alerted the public to a new virus,...

African Development Bank President Akinwumi Adesina opens trading on London Stock Exchange

“My ringing of the bell here today marks the beginning of a new exciting, strategic, and impactful engagement.” – African Development Bank President Akinwumi...

Nickelback Celebrates 15th Anniversary of Hit Album All the Right Reasons with New Tour

"The production on the upcoming tour will bring the fire and fury that has been our calling card along with new surprises," Nickelback's Chad...

AXA Mansard Insurance Holds Board Meeting For Approval Of 2019 Audited Accounts

Pursuant to the post-listing requirements of the Nigerian Stock Exchange for quoted companies, AXA Mansard Insurance Plc hereby informs The Exchange (The Exchange), esteemed...

More Articles Like This