21 Sep

Daily Watch – MPC resurrects banking NPL fears, Forte Oil halts share sale

  • The CBN on Wednesday raised more money from an auction of treasury bills than originally planned after it received subscriptions for almost four times the amount of debt initially on offer, traders said. The bank raised ₦215.88 billion ($686 million) at the auction, ₦75 billion more than planned, with the one-year paper accounting for most of the debt. Total subscription at the auction stood at ₦559 billion. Investors bid as much as 18.9 percent for the one-year debt and as low as 13.15 percent for the three months note. The bank raised ₦22.78 billion in three-month bills at 13.15 percent, ₦24.74 billion in six-month bills at 16.8 percent and ₦168.36 billion in one-year bills at 17 percent. Traders said foreign investors sold dollars last week in anticipation of the auction, boosting demand for the bills and also liquidity on the currency market.
  • Four Nigerian banks are operating with too many non-performing loans on their books and with liquidity ratios below the minimum requirement, two members of the MPC said in statements on the CBN’s website. They did not name the lenders but said the four banks together were equivalent to at least one systemically important bank, policy-setter Doyin Salami said in his statement, published late on Tuesday. Financial sector stress tests showed capital adequacy ratios for the industry in Nigeria worsened to 11.51 percent in June, from 12.81 percent in April, as against a regulatory minimum of 15 percent for lenders with international licenses. “The financial performance indicators showed that when the four outlier banks were removed, capital adequacy, (NPLs) non-performing loan ratio, as well as liquidity ratio, are all above the prudential requirement,” another member, Balami Dahiru Hassan, said. NPLs stood at 15.07 percent in June compared with 5 percent regulatory limit. Salami said the ratio stood at 8.17 percent when excluding the four lenders in question.
  • Forte Oil has put a planned ₦20 billion ($64 million) share sale on hold, after it received regulatory approval for the offer, due to restructuring, it said on Wednesday. “The board has taken a strategic decision to put the offering on hold pending the conclusion of an ongoing corporate restructuring with respect to maximising emerging opportunities in the Nigerian energy sector,” it said in a statement. In August, Forte Oil said it was in talks with a major refinery to form a strategic partnership for local refining of petroleum products in Africa’s top oil exporter.
  • Union Bank has begun a share sale to existing shareholders to raise ₦50 billion ($159 million) after regulatory approval, the bank said on Wednesday. The mid-tier bank said the rights issue opens for subscription on 20 September and closes on 30 October. It plans to offer 12.1 billion shares at ₦4.10 each, issuing five new shares to investors for every seven already held. Union Bank, set up 100 years ago, said it planned to spend 80 percent of the funds to enhance its regulatory capital and boost working capital. The lender, in which Atlas Mara, the African investment vehicle of former Barclays boss Bob Diamond, owns a 22.1 percent stake, has said it planned to raise funds also to tap opportunities to lend to agribusinesses. Shares in Union Bank, which have gained 9.1 percent so far this year, fell 4.67 percent on Wednesday to ₦5.70 on the Lagos bourse, a 28 percent premium to the rights price.