The Nation Newspaper

Category: Money

  • CBN pegs subsidiaries’ directors in HoldCos’ boards at 30%

    CBN pegs subsidiaries’ directors in HoldCos’ boards at 30%

    The Central Bank of Nigeria (CBN) has listed fresh conditions for holding companies (HoldCos) and their subsidiaries.

    According to CBN, the directors and top management of the subsidiaries, should, henceforth, not constitute more than 30 per cent of the HoldCos’ boards.

    FirstBank of Nigeria, Stanbic IBTC Bank and First City Monument Bank (FCMB) operate the HoldCo structure.

    CBN repealed the universal banking guidelines and introduced a new model in 2010 as part of efforts to reposition the industry. The new model allowed banks to retain non-core banking businesses by evolving into a non-operating HoldCo structure.

    Under the new rule, a HoldCo is expected to hold equity investment in banks and non-core banking businesses in a subsidiary arrangement. This arrangement seeks to ring-fence depositors’ funds from risks inherent in non-core banking businesses.

    The CBN said the appointment of such individuals into the board of HoldCos must also be approved by it, adding that where such an appointment is approved, the aggregate number of directors from the subsidiaries and associates at any point, shall not exceed 30 per cent of the membership of the board of the HoldCo.

    This position was contained in the CBN guidelines for licensing and regulation of financial HoldCo. Also, a financial HoldCo must have a minimum paid-up capital, which should exceed the sum of the minimum paid up capital of all its subsidiaries, as may be prescribed by the various sector-regulators from time to time.

    The HoldCos were also directed not to pay dividends on their shares, except all its preliminary expenses; organisational expenses; share selling commission; brokerage; losses incurred and other capitalised expenses not represented by tangible assets (excluding goodwill) have been completely written off.

    Also, adequate provisions would have been made to the satisfaction of the CBN for actual and contingent losses.

    “A financial HoldCo must ensure that its subsidiaries comply with the Capital Adequacy Ratio (CAR) prescribed by their respective sector regulators. A director or an insider-related individual shall not borrow more than 0.1 per cent of the financial HoldCo’s shareholders’ funds from the subsidiaries within the group, except with the prior approval of the CBN. The maximum loan to all insiders shall not exceed one per cent of the financial HoldCo’s shareholders’ funds,” the guidelines indicated.

    The guidelines also said a financial HoldCo shall be a source of financial and managerial strength to the subsidiaries. “In serving as a financial and managerial strength to its subsidiaries, a financial HoldCo shall maintain financial flexibility and capital-raising capabilities for supporting its subsidiaries.

    “It shall also stand ready to use available resources to augment capital funds of its subsidiaries in periods of financial stress or adversity,” it said.

    This guidelines, issued in exercise of the powers conferred on the CBN under the Central Bank of Nigeria Act, 2007(CBN Act) and the Banks and Other Financial Institutions Act, Cap B3, Laws of the Federation of Nigeria, 2004(BOFIA), complements CBN Regulation on the Scope of Banking Activities and Ancillary Matters, No 3, 2010 and is intended to facilitate understanding of the requirements for the adoption and operations of a financial HoldCo in the country.

    It said a financial HoldCo may acquire any permissible financial institution, subject to prior approval of the CBN. Where the target company is outside the supervisory purview of CBN, the prior approval of the relevant regulator will also be required.

    Also, a financial (HoldCo) that elects to change to mono-line commercial or merchant banking shall seek the prior approval of the CBN. “The promoters of financial HoldCo shall be required to submit a formal application for the grant of a financial HoldCo licence addressed to the CBN Governor,” it said.

    The CBN also said no financial HoldCo shall engage in any transaction or maintain any business relationship with any of its subsidiaries, except such transaction is conducted at arms-length; borrow from the Nigerian banking system for the purpose of capitalising itself or any of its subsidiaries; obtain a loan based on the guarantee of its banking subsidiary/associate, except where the loan is secured by dividend income or Service Level Agreements by the financial HoldCo for services to its banking subsidiaries.

    Besides, credit by a banking subsidiary to its HoldCo would be regarded as a return of capital and deducted from the capital of the bank in computing the bank’s capital adequacy ratio; Any bank lending to subsidiaries within its financial HoldCo group would attract 100 per cent risk weight (if it is fully secured) otherwise it would be removed from the capital of the bank when computing capital adequacy ratio.

  • Investors hunt for penny stocks in tight market

    Investors hunt for penny stocks in tight market

    With relatively low dividend yield on highly capitalised stocks, investors appeared to be turning to low-priced stocks as the stock market dithered between profit-taking and bargain-hunting.

    Several low-priced stocks, otherwise known as penny stocks, traded at significant premium above market average last week, underlining the increased investors’ appetite for several low-priced stocks with potential for dividend-payment.

    Average gain by investors at the Nigerian Stock Exchange (NSE) stood at 0.58 per cent last week. Investors in low-priced stocks however recorded better bargains with many low-priced stocks closing with double-digit gains.

    Penny stocks dominated the top gainers’ list. Honeywell Flour Mills led the bullish stocks with a gain of 11.30 per cent to close at N3.94 per share. AG Leventis Nigeria followed with a gain of 10.49 per cent to close at N1.58. CourteVille Business Solutions rose by 9.84 per cent to close at 67 kobo. University Press returned 9.46 per cent to close at N4.05. RT Briscoe added 9.09 per cent to close at N1.20. Ikeja Hotel chalked up 7.02 per cent to close at 61 kobo while Vitafoam Nigeria’s share price rose by 5.0 per cent to N4.20. Meanwhile, three large-cap stocks made the top 10 gainers’ list, including Forte Oil, which rose by 10.14 per cent to close at N148.99; Access Bank that increased by 6.17 per cent to close at N8.26 and CAP, which added 5.96 per cent to close at N40 per share.

    The benchmark index at the NSE, the All Share Index (ASI), recorded a modest return of 0.58 per cent at 39,311.60 points as against its week’s opening index of 39,083.66 points. Aggregate market value of all quoted equities rose by N374 billion from N12.554 trillion to N12.928 trillion. The significant increase was partly due to the listing of SEPLAT Petroleum Development Company during the week. Seplat had on Monday listed about 543.28 million ordinary shares of 50 kobo each at N567 per share.

    While there were 42 decliners to 31 gainers, gains in the highly capitalised sectors boosted the overall market position. Sectoral indices for the dominant banking, oil and gas and industrial goods sectors closed on the upside. The NSE 30 Index, which tracks the 30 most capitalised stocks, recorded a week-on-week return of 0.34 per cent. The NSE Banking Index gained 1.14 per cent while the NSE Oil and Gas Index recorded the highest weekly return of 2.75 per cent. The NSE Industrial Goods Index recorded a weekly return of 1.46 per cent. The NSE Insurance Index indicated average return of 0.47 per cent. However, the NSE Consumer Goods Index depreciated by 0.76 per cent.

    Turnover during the four-day trading week stood at 1.53 billion shares worth N14.31 billion in 17,704 deals as against a total of 1.64 billion shares valued at N23.16 billion that were traded in 21,620 deals in the previous week. The market closed on Thursday. The government had declared Friday as public holiday in commemoration of Good Friday.

    Analysis of the transactions showed that the financial services sector remained the main driver of market activities. Financial services stocks accounted for 1.33 billion shares valued at N10.39 billion in 10,582 deals; representing 86.7 per cent of aggregate turnover volume.

    The conglomerates sector occupied a distant second on the activity chart with a turnover of 102.92 million shares worth N578.97 million in 1,198 deals. Consumer goods sector placed third with 28.98 million shares worth N1.73 billion in 2,218 deals.

    On stock by stock basis, the trio of United Bank for Africa Plc, UBA Capital Plc and Transnational Corporation of Nigeria Plc were the most active stocks. The three stocks accounted for 800.38 million shares worth N4.77 billion in 2,373 deals, contributing 52.3 per cent of total turnover volume.

     

     

  • NSE introduces new pricing model for large companies

    NSE introduces new pricing model for large companies

    The Nigerian Stock Exchange (NSE) has decided to replace the current single pricing methodology with a dual pricing methodology that allows variance in pricing according to the initial or subsisting price of a stock.

    The need for the new dual pricing methodology became evident last week, following the listing of the first upstream company on the stock market. The NSE recorded a milestone last week with the listing of the first upstream company, SEPLAT Petroleum Development Company Plc, an indigenous independent oil and gas company.

    The listing of Seplat activated the exploration and production subsector of the oil and gas sector and added N313 billion to the aggregate market value of quoted companies. About 543.3 million ordinary shares of 50 kobo each were listed at N576 per share.

    Manager, rules and interpretation, Nigerian Stock Exchange (NSE), Oluwatoyin Adenugba, said the listing of Seplat exposed a lacuna in Exchange’s current rule on pricing methodology.

    According to the NSE, the relevant rule on pricing, Article 100, does not set forth a pricing methodology for determining the price movement where a new security is priced above N100 at the time of listing.

    Adenugba said the NSE has then decided to take the most reasonable step in the interest of investors and the capital market by treating the newly listed Seplat as “Group B” securities.

    As a “Group B” security, a trade of 10,000 units will lead to a change in the published price of Seplat.

    Also, in order to provide for similar instances in the future, the Exchange shall seek amendment to the Article 100 of the Rules and Regulations Governing Dealing Members to include a clause on categorization of a new listing that is priced above N100 as a “Group B” stock.

    According to the proposed amendment, for purposes of calculating price movements and price limits, equity securities traded on the Exchange shall be classified as follows: “Group A” shall consist of equities with a primary market maker that are not classified in Group B; and “Group B” shall consist of equities with a primary market maker, that are priced above N100 per share for at least four of the last six months; or new security listings that are priced above N100 at the time of listing on the Exchange.

    With the amendment, the “Group A” stocks now include Dangote Cement, Nigerian Breweries, Nestle Nigeria, Seplat, Lafarge Cement Wapco Nigeria, Guinness Nigeria, Forte Oil, Total Nigeria and Mobil Oil Nigeria Plc.

     

  • PZ Cussons grows Q3 profit by 32% to N5.2b

    PZ Cussons grows Q3 profit by 32% to N5.2b

    PZ Cussons Nigeria Plc has become more profitable in recent period as latest operational report showed substantial increase in the profit-margin of the conglomerate.

    Key extracts of the interim report and accounts of PZ Cussons for the nine-month period ended February 28, 2014 showed that average pre-tax profit margin improved to 9.83 per cent by February 2014 as against 7.59 per cent recorded in comparable period of 2013.

    The improvement in the cost management enabled the conglomerate to optimize its modest sales growth of 2.04 per cent into 32.3 per cent increase in pre-tax profit. Group turnover stood at N52.59 billion in 2014 as against N51.54 billion in 2013. Profit before tax meanwhile rose from N3.91 billion to N5.17 billion. Profit after tax also rose by 33.3 per cent from N2.90 billion to N3.87 billion.

    PZ Cussons had recently distributed N5.16 billion from its general reserve as a special dividend to shareholders. A breakdown of the special dividend indicates that shareholders will receive N1.30 per share.

    PZ Cussons had also, for the first time, paid an interim dividend of about 20 kobo after posting 53 per cent increase in profit for the half year ended November 30, 2013. Gross turnover rose from N31 billion in 2012 to N32.46 billion in 2013. Profit before tax rose by 53 per cent to N3.1 billion from N2 billion. Profit after tax also rose from N1.515 billion to N2.317 billion.

    PZ Cussons had ridden on the back of improved cost management and internal efficiency to double net earnings in the immediate past year, prompting the company to distribute N2.22 billion as dividends to shareholders. The gross dividend of N2.22 billion represented a dividend per share of 56 kobo, an increase of 30 per cent on 43 kobo paid for the previous year.

    Audited report and accounts of PZ Cussons for the year ended May 31, 2013 showed that while sales slipped by 1.12 per cent, profits before and after tax jumped by 77.6 per cent and 110 per cent respectively. The improvement in the bottom-line impacted on the underlying returns to shareholders as earnings per share increased from 61 kobo in 2012 to N1.23 in 2013.

    Turnover closed May 2013 at N71.34 billion as against N72.15 billion recorded in 2012. Profit before tax meanwhile rose from N4.31 billion to N7.65 billion. Profit after tax also doubled from N2.54 billion to N5.32 billion.

    The performance in 2013 represented a major recovery for the fast moving consumer good company, which had suffered significant decline in the previous year.

    Audited report and accounts for the year ended May 31, 2012 had shown turnover of N72.16 billion as against N65.9 billion in 2011. Gross profit however dropped to N16.18 billion as against N18.45 billion. Profit before tax also halved to N4.31 billion compared with N8.03 billion in 2011 just as profit after tax dwindled from N5.7 billion to N2.5 billion.

    PZ Cussons appeared to have benefitted from extensive cost restructuring and internal efficiency management.

    With costs constraints and efficiency issues becoming evident in its performance, the global conglomerate had started global restructuring of its operations including closure of manufacturing operations in several countries and concentration in some countries including Nigeria.

    The global restructuring project was sequel to high costs of operations that have increasingly impacted on the global profitability of the conglomerate.

    According to a document on the global restructuring operations with details for West Africa, PZ Cussons group developed the global restructuring programmes to ensure that its supply chain cost base remains at a competitive level given sustained rise in raw material costs together with significant wage inflation in emerging markets.

     

     

    The group also focused on reducing significantly its overhead at a number of other manufacturing facilities.

    “We believe the benefits of this project will be seen in the new financial year through lower supply chain overheads, wage inflation mitigation as well as reduction in high capital maintenance cost that would have been associated to the closed or restructured facilities. It will ultimately show an improved performance and higher returns on investments,” the document had indicated.

    PZ Cussons has manufacturing plants in Ilupeju, Ikorodu; both in Lagos State and Aba, in Abia State. The Nigerian operations include manufacturing and marketing of soaps, detergents, health and beauty products, electrical goods and nutritional products. More than 77,000 Nigerian individual and institutional investors hold equity stakes in the conglomerate.

     

     

     

     

     

  • CBN releases guidelines for N200b MSME Fund

    The Central Bank of Nigeria (CBN) has unveiled guidelines for the management of the N220 billion Micro, Small and Medium Enterprises (MSME) Development Fund it launched earlier in the year.

    In a circular yesterday, the CBN said the fund will be managed by a Special Purpose Vehicle (SPV). It however added that the apex bank will commence the management of the fund pending the establishment and appointment of the SPV or Managing Agent.

    It said a large number of un-served and under-served clients exist in the Nigerian MSME sub-sector. To address the funding requirements of this critical segment of the economy, 80:20 ratio has been designed for on-lending to micro enterprises and Small and Medium Enterprises (SMEs) respectively.

    The CBN said that women’s access to financial services should increase by 15 per cent annually in order to eliminate gender disparity. To achieve this, N132 billion of the fund has been earmarked for providing financial services to women.

    The regulator said in operating the fund, special consideration will be given to institutions that will provide financial services to graduates of the CBN’s Entrepreneurship Development Centers (EDCs).

    Also, 10 per cent of the fund (N11 billion) will be earmarked for social and developmental objectives as grants; Interest Drawback Programme will get N6.60 billion while Managing Agent’s (MA) Operational Expenses will get N4.4 billion. However, MA is expected to generate income from its operational activities to fund its future expenses on a sustainable basis.

    The CBN explained that N6.6 billion earmarked for Interest Drawback will be used to settle the rebates to financial institution’s customers under the fund who repay their loans as and when due while the N11.0 billion for grants will fund programmes that are aimed at developing the MSME sub-sector.

    However, 90 per cent of the Fund, amounting to N198 billion, will be utilised for the provision of direct on-lending facilities to participating financial institutions.

    It said participating financial institutions could only finance agricultural value chain activities; trade and general commerce; cottage industries; artisans among others.

    The banking watchdog said to ensure that productive sectors of the economy continue to attract more financing necessary for employment creation and diversification of the country’s economic base, a maximum of 10 per cent of the commercial component of the fund will be channeled to trading and commerce.

  • Bank of America’s profit dips

    Bank of America Corp reported an unexpected first-quarter loss after it took a $6 billion charge to cover litigation expenses, a figure that far exceeded the legal settlements the US bank announced recently.

    Revenue improved in many of the bank’s major businesses, but the results were overshadowed by its bigger-than-expected legal costs. The bank had previously said a settlement would cut into its earnings by $3.7 billion before taxes.

    The extra litigation expenses came from setting aside money to cover future legal settlements tied to previously disclosed mortgage-related matters, Chief Financial Officer Bruce Thompson told reporters.

    Still, the bank’s setting aside more money does not mean a settlement is imminent, Thompson told analysts on a separate conference call.

    The bank’s shares fell 2.1 per cent to $16.04 on the New York Stock Exchange shortly after midday.

    Rivals JPMorgan Chase & Co and Citigroup Inc had made profits for the quarter.

    Bank of America’s quarterly loss, its first since the second quarter of 2011, underscores how much the bank is still suffering from its disastrous acquisition in 2008 of Countrywide Financial Corp at the height of the financial crisis. That deal was a key factor in the more than $50 billion of legal expenses the bank has logged since the financial crisis.

    In March, Bank of America agreed to a $9.3 billion settlement to resolve claims that Countrywide and other Bank of America entities overstated the quality of the mortgages they sold to Fannie Mae and Freddie Mac between 2005 and 2007. The bank had previously set aside funds to cover much of the settlement with the two agencies, but not all of it.

    Indeed, the bank still has other home loan issues to resolve. In March, Bank of America said it was still subject to penalties and fines from the US Department of Justice, state attorneys general, and other government authorities for mortgages and related bonds.

  • AhliUnited Bank considers $5b sale, merger deal

    Ahli United Bank (AUB) is evaluating a sale or a merger with a rival bank in a potential $5 billion deal, several bankers familiar with the situation said yesterday.

    The bank is Bahrain’s largest lender.

    A deal of this size would be the largest banking transaction in the region for the past 20 years, according to Thomson Reuters data, beating Emirates Bank’s $3.7 billion acquisition of National Bank of Dubai in 2007 and Qatar National Bank’s $1.9 billion purchase of Societe Generale’s Egyptian business in 2012.

    It could also mark a revival of significant merger and acquisition activity in the Gulf where mergers tend to be difficult because major shareholders – often governments or prominent families – can be reluctant to cede control unless they get a generous price.

    AUB is one of only a few banks in the Gulf region with pan-Arab operations and as such offers scope for further growth in countries such as Egypt, where western banks are seeking to cut their exposure.

    “A strategic review is underway in an effort to identify suitable investors,” said one of the sources who asked not to be named because the talks are private. “One way to do it is to combine AUB with another banking institution.”

     

  • Ecobank, FBN, others provide Accugas $170m facility

    Accugas Limited has signed a $170million a medium-term acquisition finance facility with Ecobank Nigeria, FBN Bank (UK), Union Bank of Nigeria, and Union Bank (UK). FBN Capital Limited acted as structuring bank, sole initial mandated lead arranger, financial modelling bank and global facility coordinator.

    The facility will be used to part-finance the acquisition of the entire issued share capital of East Horizon Gas Company (EHGC) Limited for a total consideration of up to $250 million. EHGC was established by Oando Plc with the intention of constructing and operating an 18-inch, 128 km gas pipeline that connects with the Obigbo-Alscon pipeline at Ukanafun to supply gas to an industrial off-taker located in Mfamosing, Cross River State, and to meet the needs of other industrial users in the Calabar region.

    Seven Energy’s acquisition of EHGC is in line with its strategic plans to expand its gas infrastructure assets in the south east Niger Delta, Accugas Managing Director, Mr. Stephen Tierney said.

    Through its assets and subsidiary, Accugas, Seven Energy has a number of infrastructure projects in the region, including a gas processing facility at the Uquo field and a gas pipeline network, which will have the capability to supply gas in the Port Harcourt, Aba and Calabar areas. In consolidating the gas infrastructure assets of Accugas and EHGC, Accugas aims to strengthen its distribution platform, increase efficiency and broaden its geographical reach, furthering Seven Energy’s intention to create a leading gas distribution business in Nigeria, Tierney said.

    Commenting on the transaction, Phillip Ihenacho, Chief Executive Officer, Seven Energy said: “This is a landmark transaction for us. We are delighted to expand our midstream operations in Nigeria with this investment. It is a perfect fit to our strategy of investing in core midstream infrastructure assets in the south east region of the country. I would also like to thank the entire team for their achievement in bringing this important financing transaction to a close.”

    The Chief Financial Officer, Seven Energy, Bruce Burrows, commended the lenders for their support, and in particular, their dedication to ensure that the completion of the EHGC acquisition process was in line with the sponsors’ timetable. He noted that FBN Capital’s role, particularly in working closely with Seven Energy, the lenders and the various independent consultants in concluding the transaction.

    The Managing Director and Chief Executive Officer of FBN Capital Limited, Kayode Akinkugbe, said: “FBN Capital is very proud of the instrumental role it played in assisting Seven Energy to structure and arrange the financing for the acquisition. FBN Holdings Group feels a strong sense of responsibility towards fostering growth in the power, gas pipeline and oil and gas sectors and we will continue to deploy our extensive debt arranging experience and structuring expertise in executing robust transactions in record time.”

    The Director and Head Debt Solutions, FBN Capital Limited, Patrick Mgbenwelu, said: “We appreciate the responsibility and trust Seven Energy has placed with FBN Capital to advise and arrange the financing for the acquisition of EHGC. FBN Capital remains committed to further strengthening this relationship and supporting Seven Energy in realising its various financing goals and objectives.”

  • Economy needs central bank’s assistance, says Federal Reserve chair

    Federal Reserve Chair Janet Yellen said yesterday the US economy appeared to be slowly moving toward full employment, but that it would need help from the central bank for some time to come.

    In her second public speech since taking the Fed’s helm, Yellen said it was “quite plausible” the economy would be back to near full employment and a healthier level of inflation by the end of 2016.

    “I do think we are seeing very meaningful progress, although clearly … the goal has not been achieved at this point,” she told the Economic Club of New York.

    Yellen used her speech to provide a monetary policy road map of sorts to one of the Fed’s most important constituencies – Wall Street.

    How long rates will stay near zero, she said, will depend on how far the U.S. economy remains from the central bank’s employment and inflation goals, and how long it will likely take to meet them. She stressed that the Fed would respond to shifting economic conditions as it judges when to finally tighten monetary policy after years of unprecedented stimulus.

    And although she emphasized how important it will be for the Fed to keep monetary policy easy for some time, she pointed to an eventual end to those policies.

    “As the recovery proceeds and healing occurs, it’s obvious that we will need to tighten monetary policy to avoid overshooting our target,” she said. “We will remain very focused on removing accommodation when the right time has come.”

    But she also emphasized that unforeseeable events could alter the central bank’s current course, as it has several times over the course of the recovery.

    The Fed could even set aside efforts to wind down its bond-buying stimulus, she said, pushing back against broad expectations that the Fed is nearly certain to end the bond-buying, now at $55 billion a month, by the end of the year.

    The Fed, frustrated with the slow U.S. recovery from the 2007-2009 recession, aims for maximum sustainable employment and a rise in inflation to 2 percent from just above 1 percent now.

  • Stanbic, Goldman Sachs emerge advisers for $100m Diaspora bonds

    The Federal Government of Nigeria has appointed Stanbic IBTC Bank and Goldman Sachs as advisers for its debut $100 million Diaspora bond issue, the debt management office said on Tuesday.

    The debt office, which also appointed legal advisers for the issue, said it was also looking to appoint bookrunners for the bond sale.

    Stanbic IBTC Bank is a subsidiary of Stanbic IBTC Holdings Plc, a full service financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management.

    Standard Bank Group, to which Stanbic IBTC Holdings belongs, is rooted in Africa with strategic representation in 18 key sub-Saharan countries and other emerging markets; Standard Bank has been in operation for over 150 years and is focused on building first-class on-the-ground banks in chosen countries in Africa and connecting other selected emerging markets to Africa and to each other.