Banking Stocks Rebound as Investors Trade N5.3bn Shares


Banking stocks rebounded at the stock market yesterday as apprehension among investors over the Central Bank of Nigeria (CBN)’s directive to banks on payment of dividends continues to reduce.

The CBN had, at the weekend, issued a new policy, which among others, stipulates that banks or discount houses that do not meet the minimum capital adequacy ratio shall not be allowed to pay dividend.

According to the CBN, banks that have a Composite Risk Rating (CRR) of “high” or a non-performing loan (NPL) ratio of above 10 per cent shall not be allowed to pay dividend; and those that meet the minimum capital adequacy ratio (CAR) but have a CRR of “Above Average” or an NPL ratio of more than five per cent but less than 10 per cent shall have dividend payout ratio of not more than 30 per cent.

The central bank, however, pointed out that there shall be no regulatory restriction on dividend pay-out for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than five per cent.

When the news of the policy hit the market some investors dumped their banking shares on Monday and Tuesday. However, fewer investors appear to be selling off their banking shares, while more are buying. A development that saw more banking stocks appreciate yesterday.

Eight banks appreciated in value, making the NSE Banking Index to record the highest gain of 1.1 per cent.

The banks that appreciated were: Sterling Bank Plc (3.8 per cent); United Bank for Africa Plc (3.2 per cent); FBN Holdings Plc (2.7 per cent); Access Bank Plc (1.6 per cent); GTBank Plc (1.5 per cent); Diamond Bank Plc (0.81 per cent) and ETI Plc (0.2 per cent).

An investment banking firm, Cordros Capital Limited (CCL) has said the CBN’s policy would not affect dividend payouts in the medium term.

In report yesterday, the investment banking firm, said based on the directive by CBN and contrary to earlier jitters that trailed the release of the circular, they think the directive more appropriately reveals the apex bank’s commitment to financial stability.

“That said, it is our view that the CBN’s latest directive is unlikely to, in the medium term at least, affect the dividend payouts we expect from the banks covered in this report. We should mention that many of the banks’ dividend payment ratios (DPRs), in recent years, have barely reached the peak of the CBN’s requirements on DPR,” they said.