Shareholders lose N703bn in banks, insurance firms

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Shareholders lose N703bn in banks, insurance firms

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Investors in Nigeria’s capital market lost N703.253 billion in banking and insurance firms following the depression that had persisted on the local bourse.

Checks by New Telegraph showed that the banking subsector recorded a loss of N700 billion or 32 per cent to close at N2.161 trillion in market capitalisation on December 15, as against N2.861 trillion at the close of business on July 31, 2014.

Also, the insurance sub-sector slipped by 2.11 per cent or N3.253 billion year to date, to close at N154.168 billion from N157.421 billion at the end of July.

Meanwhile, market analysts believed that despite the general lull in the stock market, the run in banking sector might not be unconnected with recent reports that Asset Management Corporation of Nigeria (AMCON) have began to offload some of the shares it acquired from the non-performing loans of banks and other companies preparatory to the corporation’s redemption of its N976 billion bonds last October.

Some developments in the domestic and global economy are also causing bank stocks to lose their attraction.

The fall in global oil prices had prompted monetary policy makers to devalue the naira by 8.3 per cent or N13, from N155 per dollar to N168, for the first time in three years.

Among other measures, the Cash Reserve Ratio (CRR) on private sector deposits was raised to 20 per cent from 15 per cent previously, while the CRR on public sector was unchanged at 75 per cent. Interest rate was also raised by 100 basis points, the first change in two years.

Fitch Ratings, a global ratings agency, had, last October, said that actions aimed at protecting the economy and the banking system by the Central Bank of Nigeria (CBN) would make the profits of banks in the country to decline in 2015.

While it noted that the banks were performing well in the face of the challenges, some market operators opined that drops in profit often lead to negative reactions from investors.

According to the Managing Director and Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, a drop in profit would indeed lead to a reduction in investors’ appetite for bank stocks. He noted that the probability of decline in profit was just one of the adverse factors affecting the market price of banking and other stocks.

“More compelling factors such as sell down by foreign portfolio investors, threat of naira devaluation, likelihood of further hike in interest rates and political uncertainly combined have exerted more downward pressure on equity prices than even the risk of decline in profitability,” he said.

Speaking on the challenges of insurance subsector to New Telegraph, the Managing Director, Crane Securities Limited, Mr Mike Eze, said that some of the insurance companies were not helping matters, as they are most visible among companies that are often sanctioned for breaching post-listing requirements.

He linked the inability of the sub-sector to rise above the nominal level to crisis of confidence. Eze noted that a few ones that raised high expectation for good results ended up posting negative financial results.

Babatunde Akinsola
Babatunde Akinsolahttps://naija247news.com
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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