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The Market Today - 06 March 2019

Shareholders approve Access Bank & Diamond Bank merger                                          

The merger between Access Bank and Diamond Bank has crossed another milestone, with the two banks securing Shareholder's approval required for the completion of the ₦72.5 billion ($201 million using I&E FX window rate of ₦360.77/$) deal. Both financial institutions held their respective court-ordered meetings yesterday in Lagos where shareholders gave unanimous approval for the merger. While the Central Bank of Nigeria and the Securities and Exchange Commission had earlier granted approvals in principle for the merger on 15 January, 2019, both regulatory bodies are still expected to give final approvals for the transaction before the deal is completed. Nonetheless, Access Bank has guided to an April 1 timeline for the deal completion after which the integration process will begin and both banks will commence operating under the new Access Bank brand. The merger is expected to produce the largest banking group in Nigeria based on its number of customers (29 million customers) and a total assets size of ₦6.1 trillion (based on 9M’18 figures).                                      

Banking sector drives another green close for ASI                                               

Following mixed performance among sectors, the NSE ASI gained marginally, rising 14bps with the Banking sector once again recording the highest gains. Meanwhile, market activity improved d/d, recording a value of ₦3.5 billion. Market breadth turned negative with 14 advances and 18 declines. We expect to remain varied in the equity market as investors on the look-out for earnings releases to spur stronger activity levels and sentiment.                                         

Stock Watch: Amidst shareholders’ approval of the merger at the court-ordered meetings yesterday, ACCESS gained 0.84% yesterday to close at ₦6.00, while DIAMONDBNK remained flat at ₦2.50.                    

Bears persist in the fixed income market                                      

The CBN once again conducted an OMO auction yesterday, selling c.₦169 billion (Offer: ₦150 billion) across the 100DTM and 184DTM bills at stop rates of 11.90% and 13.45% respectively (effective yields: 12.30% and 14.43%). Again, whilst the CBN refrained from offering the longest dated bill at the auction, the stop rate on the 184DTM bill moderated 3bps from previous auction levels. Meanwhile, the Interbank Call rate declined 467bps to 9.33%. We foresee continued sell-offs in the bond space as profit taking persists. Meanwhile, we expect tightened liquidity to once again stifle demand in the T-bills market.