BREAKFAST REPORT: THE WEEK AHEAD, STOCK WATCH & RECOMMENDATIONS FOR THE WEEK

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The Central Bank of Nigeria (CBN) on Friday announced the takeover of Skye Bank by a bridge bank- Polaris Bank. This comes after a forensic audit by the apex bank found that the bank required urgent recapitalization which the shareholders were unable to deliver. In its circular, the CBN revealed that the newly established Polaris Bank would be capitalized by AMCON and would assume the assets and liabilities of Skye Bank pending a sale. Following this announcement, the Nigerian Stock Exchange suspended trading on the stock. We note that despite the well-known challenges at the Bank, which forced the CBN to intervene in July 2016, the stock rose 4% on Friday to ₦0.77 and is up 54% YTD.

Equity:

Investors capitalized on beaten-down stocks to take the bourse to an 18bps close, capping off a mildly positive week as the index rose 66bps w/w – first positive w/w close in five weeks. The week was dominated by investor interest in down-trodden stocks, with the Banking sector seeing the most activity, we foresee a continuation of this today, with the gains fizzling out as the week progresses amid still weak investor sentiment.

Stock Watch:

After gaining 16% w/w to close at ₦5.80, UBN was the best performing banking stock last week. The stock has lost 26% YTD and is 34% below its year-high price of ₦8.78.

Fixed Income:

We expect persistent buoyant liquidity to support buying in the T-bills market at week open. However, we anticipate more cautious trading on bonds ahead of the Central Bank of Nigeria Monetary Policy meeting (Monday & Tuesday) and the September Bond Auction (Wednesday).

 

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