FINANCIAL SERVICES
CBN sequesters N321.6 billion from banks in new CRR Debits
Information gathered by Nairametrics reveals about 17 banks had their vaults debited by the apex bank in CRR sequesters.
The Central Bank of Nigeria has hit commercial banks (deposit money banks) with a debit of N321.6 billion in Cash Reserve Ratio (CRR) related sequesters.
The cash reserve requirement is the minimum amount banks are expected to leave retained with the Central Bank of Nigeria from customer deposits. In January, the CRR was increased by 5% to 27.5% by the CBN Monetary Policy Committee (MPC) who explained that the decision was intended to address monetary-induced inflation whilst retaining the benefits from the CBN’s LDR policy.
Sources inform that this debits occurred towards the end of the week as CBN steps up efforts to sweep excess liquidity from the banking system. Information gathered by themoneymetrics reveals about 17 banks had their vaults debited by the apex bank in CRR sequesters.
CRR debits have remained frequent since late last year when the CBN introduced policy measures that it hoped will force banks to lend more to the private sector. Between December 2019 and July 2020, A source estimates about N4.8 trillion has been debited from bank deposits as CRR. Total banking reserves held by the CBN as at end of July was N11 trillion up from N6.2 trillion at the end of 2019. Some reports however estimate the figure at N2 trillion.
- Recent published second quarter banking results also reveal the spate of debits. Union Bank of Nigeria reported its total cash reserve requirement increased from N296 billion as at December 2019 to N484.5 billion as at June 30th, 2020. This suggests the central bank has debited Union Bank N188 billion in additional CRR between January and June 2020. .
- Sterling Bank reported that the CBN restricted about N215.5 billion of its customer deposits as of June 2020.
- FBNH one of Nigeria’s largest banking entities also reported about N797 billion of its cash remained with the CBN in CRR debits as at June 2020.
What’s the big deal? Whilst banks have complained bitterly about the spate of debits and attendant effects on their deposits, their profits appear to remain robust despite the Covid-19 pandemic. In fact, the banking sector was one of the fastest-growing in the economy at about 28.41% in the second quarter and recorded a 24% growth in the first quarter of 2020.
This suggests the plausible reason for all the debits is perhaps as a monetary policy tool geared towards foreign exchange management. Since the CBN whittled down its OMO bills borrowings, it has resorted to pseudo capital controls to manage the forex liquidity.
To reduce the amount of naira chasing the dollar, the CBN offers higher interest rates on naira deposits. However, with interest rates at one of the lowest in recent years, sequestering excess banking funds appears a logical policy to reduce the ability of banks to engage in roundtripping.
The market capitalization of the top five banks, referred to as the Tier-1 banks decreased to N2.46 trillion at the close of business on the 30th of July 2021, as investors in these banks lost N50.45 billion during the trading week.
According to data from the Nigerian Exchange (NGX), the market capitalization of the top five banks declined to N2.46 trillion, a 2% depreciation during the week.
The loss can be attributed to the sell-off witnessed in the shares of the banks during the five trading days. A summary of performance for each bank is captured below;
First Bank Holdings Nigeria Plc (FBNH Plc)
First Bank Holdings Nig. Plc lost a total of N3.60 billion after its market capitalization declined from N269.21 billion to N265.63 billion as at the close of business on Friday.
The decline is due to the depreciation in its share price which closed at N7.40, losing about 1.3% at the end of the week.
During the week, investors traded about 36,670,439 units of the Bank’s shares valued at N272.48 million. The volume of shares traded appreciated immensely by 126.64%, when compared to 16.18 million units traded the previous week.
The bank released their second-quarter result which revealed that interest income for the period decreased by 19.36%. However, net profit for the period reported a growth of 79.76% from N12.50 billion in Q2 2020 to N22.47 billion in Q2 2021.
United Bank for Africa Plc (UBA Plc)
United Bank for Africa Plc lost N6.84 billion as its market capitalization depreciated from N266.76 billion to N259.92 billion, due to the decrease in its share price from N7.80 to N7.60, reflecting a decline of 2.6%.
UBA Plc, during the week, traded a total of 65,364,954 units valued at N507.81 million, making the bank’s stock the most traded stock amongst the FUGAZs during the week, with the highest number of shares traded on Wednesday at 19.35 million units, valued at N150.75 million at the end of the trading day.
In comparison, the bank’s share volume appreciated by 170.75%, from 24.14 million traded last week.
UBA Plc is yet to release its second-quarter financial statements for Q2 2021.
GT Holding Company Plc
GTCO Plc lost a total of N32.37 billion after its market capitalization depreciated to N838.79 billion at the end of Friday’s trading session.
The decline can be attributed to the decrease in its share price, from N29.60 traded at the end of the previous week, to N28.50 at the close of business, reflecting a drop of 3.70%.
During the trading week, investors traded a total of 55,017,679 units of the bank’s shares valued at N1.60 billion, making the bank the most traded stock in value amongst the FUGAZ during the week.
In contrast with the volume traded last week, share volume for this week increased by 127.92% from 24.14 million.
GT Holding Company is yet to release its second-quarter financial statements for Q2 2021.
Access Bank Plc
Access Bank Plc appreciated by N1.78 billion as its market capitalization increased to N327.02 billion at the end of the trading week. The gain can be attributed to the 0.5% increase in its share price from N9.15 traded earlier to N9.20.
At the end of the week, investors had traded a total of 65,279,186 units of the bank’s shares valued at N607.04 million. The total volume traded for the week grew by 232.89%, from a total of 19.61 million traded in the previous week.
Earlier this month, Fitch Ratings revised the outlook on Access Bank Plc’s Long-Term Issuer Default Rating (IDR) from Negative to Stable and also confirmed the rating at ‘B.’
Access Bank Plc is yet to release its Q2 financial result for the year.
Zenith Bank Plc
Zenith Bank Plc shares lost N9.42 billion after its market capitalization dropped to N770.78 billion from N780.20 billion at the end of the week. This decline can be attributed to the 1.20% decrease in its share price from N24.85 traded at the end of the previous week, to N24.55 at the end of the week ended 30th June 2021.
Hence, a total of 34,846,068 units of the bank’s shares were traded during the week, valued at N859.70 million. The total volume, in comparison with the previous week, depreciated by 8.14%, from 37.94 million units traded.
Zenith Bank Plc is yet to release its Q2 financial result for the year which has been approved by the Board of Directors but still awaiting approval by the CBN.
What you should know
The Nigerian Exchange Limited (NGX) closed negative week-on-week as ASI depreciated by 0.31% to close at 38,547.08.
The FUGAZ banks make up over 70% of the NSE’s Banking Sector Index, hence, they strongly influence the growth or otherwise of the index. The NGX Banking Index closed negative to decrease by 0.95%.
FINANCIAL SERVICES
Federal High Court directs meeting to consider the transfer of GTBank into a Holding Company
A Federal High Court has directed that a meeting of the holders of GTBank Plc, be convened to consider the transfer of the bank to a holding company.
The Board of Directors and management of Guaranty Trust Bank has disclosed that the Federal High Court of Nigeria on November 6, 2020, directed that a meeting of the holders of the fully paid ordinary shares of GTBank Plc, be convened on December 4, 2020 for the purpose of considering the transfer of the bank to a holding company.
This information was conveyed through a Notice of Court-Ordered Meeting by the bank, and published on the website of the NSE. It was signed by the bank’s secretary, Erhi Obebeduo, and the Nigerian legal counsel to the bank, Aluko & Oyebode.
According to the information contained in the disclosure, the court-ordered meeting of the holders of the fully paid ordinary shares of Guaranty Trust Bank Plc to be convened for the purpose of considering and if thought fit, approving, with or without modification, a Scheme of Arrangement pursuant to Section 715 of the Companies and Allied Matters Act, 2020 between the bank and the holders of the fully paid ordinary shares of 50 Kobo each in the bank.
The meeting will be held at the Oriental Hotel, 3, Lekki Road, Victoria Island, Lagos, Nigeria, at 10:00 a.m. or soon thereafter, at which place and time the Holders are requested to attend.
Resolutions to be proposed at the meeting
The following are some of the sub-joined resolutions that will be proposed, and if thought fit, passed as special resolution at the meeting:
- The Scheme of Arrangement dated November 4, 2020, a printed copy of which has been produced for the meeting and, signed by the Chairman be and is hereby approved.
- In accordance with the Scheme, the 29,431,179,224 ordinary shares of 50 Kobo each in the issued and paid-up share capital of the Bank held by the shareholders be and are hereby transferred to Guaranty Trust Holding Company Plc (the Holdco) in exchange for the allotment of 29,431,179,224 ordinary shares of 50 Kobo each in the share capital of the Holdco to the shareholders in the same proportion to their shareholding in the Bank credited as fully paid without any further act or deed.
- In accordance with the Scheme and pursuant to the prospectus issued by the Holdco, each existing holder of the Global Depositary Receipts issued by the Bank (the Existing GDRs) receive, as consideration for each existing GDR held, one new Global Depositary Receipt issued by JP Morgan Chase Bank N.A. (JP Morgan Chase), the Depositary Bank for the Holdco GDR programme (the Holdco GDRs).
- The Board of Directors of the Bank be and is hereby authorised to take all necessary actions to delist the shares of the Bank from the official list of The Nigerian Stock Exchange.
FINANCIAL SERVICES
CBN reviews appointment requirements for CCOs in Banks
The CBN has reviewed the appointment criteria for CCOs in Merchant Banks and Regional Banks.
The Central Bank of Nigeria has reviewed the appointment criteria for Chief Compliance Officers in Merchant Banks and Regional Banks (Commercial and specialized).
This is according to a circular issued by the apex bank dated October 9, 2020, and signed by its Director of Financial Policy and Regulation Department, Kevin Amugo.
According to the latest notice, Merchant banks and Regional banks are hereby granted dispensation to appoint CCOs on a grade not below an Assistant General Managers. However, the CCOs will report directly to the ECO of the financial institutions who have sole responsibility for compliance matters in the bank.
Backstory
This latest action by the CBN is the sequel to consultations and engagement with stakeholders emanating from its earlier circular referenced FPR/DIR/GEN/CIR/06/004 of September 28, 2016, in which the tentative requirements for Executive Compliance Officers and Chief Compliance Officers of deposit money banks were mooted.
Meanwhile, the requirements and responsibilities of Executive Compliance Officers remain as earlier communicated in the circular dated 28 September 2016.
A part of the recent circular signed by Mr. Kevin read thus,
“Further to the circular referenced FPR/DIR/GEN/CIR/06/004 of 28 September 2016 on the appointment of Executive Compliance Officers (ECO) and Chief Compliance Officers (CCO) of deposit money banks, the CBN has, after due considerations and presentations by stakeholders on the size, structure, operation, and dynamics of classes of operators in the sectors reviewed the requirements for the appointment of Chief Compliance Officers.”
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