Earlier this year Central bank of Nigeria announced their banking recapitalization exercise and as a result investors in the NGX have reacted, albeit in pessimistic fashion.
On March 28, 2024, the CBN revised the minimum capital requirements for banks. And since then, the market capitalization of banking stocks in the NGX has declined by 26.7%. Between March 28 and April 18, the cumulative market cap of banking stocks in the NGX declined from N8.08 trillion to N6.34 trillion.
The bank that this recapitalization affected most within this period were GTCO Holdings which lost 34.57%, with its share price declining from N52.5 to N34.35. Access Holdings has lost 29.59%, with its share price moving from N24.50 to N17.25.
Other banks like FBNH, Sterling Holdco, Zenith Bank, and UBA, has seen their share prices declined by 24.2%, 21.3%, 19.1%, and 18.9% respectively.
This antecedent offers insight into investor sentiment towards banking equities since the announcement of the recapitalization exercise.
Experts reactions
Some experts provided different view on the issue. Adebayo Adebanjo, a Senior Analyst with Cardinal Stone Securities attributed investors’ sentiments to “market worry”. He pointed out that the impact stems from the shareholding dilution resulting from capital raises through rights issues. According to him although banks have a two-year deadline to shore up their capital bases to meet the minimum capital requirements, banks listed on the NGX have started making efforts to increase their paid-up capital through capital raises.
Noting example, he stated that UBA, Zenith Bank, FBN Holdings, GTCO Holdings, and Access Holdings have announced upcoming rights issue programmes.
A retired civil servant, Mrs Alabi, disclosed that the will create an issue of a shareholding dilution.
According to her “What I am doing presently is selling the ones (banking stocks) I have right now, so I can reinvest and buy more when the price is down.”