Nigerian bank stocks head for biggest plunge in 10yrs

…as investors fear recapitalisation dilution

Nigerian banking stocks are on course for their biggest monthly slide in ten years as investors fearing dilution from a recapitalisation exercise dump their shareholdings.

The banking index, which tracks the stocks of the lenders listed on the Nigerian Exchange Group, was down 23.4 percent as of April 19, according to data from the NGX.

Since the CBN announced new capital rules for the banks on March 28, the index has plunged 35 percent to 760.55 points on April 25 from 1029.6 points.

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“The market thinks that rights issues are in the offing and that equity dilution is on the cards,” Guy Czartoryski, head of research at Coronation Merchant Bank, said.

“True enough, but has the correction gone far enough? In aggregate, we think it has,” Czartoryski said.

Nigerian banks have 24 months to raise an additional c.N4 trillion to meet the CBN’s new capital rules.

Some of the biggest lenders from Access Bank to Guaranty Trust Bank have already announced plans to raise capital through Rights Issues, a decision investors fear will lead to a dilution of their existing shareholdings.

Details later…