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The Market Today - 18 December 2018

Access Bank to acquire Diamond Bank                                           

The Board of Access Bank Plc yesterday announced the signing of a Memorandum of Agreement (MoA) with Diamond Bank Plc regarding a potential merger of the two banks expected to be completed in the first half of 2019. The proposed merger would involve Access Bank acquiring the entire issued share capital of Diamond Bank in exchange for a combination of cash and shares in Access Bank via a scheme of merger. Based on the proposed agreement, Diamond Bank shareholders will receive ₦3.13 per share comprising a cash consideration of ₦1.00 per Diamond Bank share and a share exchange fixed at 2 New Access Bank (resulting entity) ordinary shares for every 7 Diamond Bank shares owned. Following CBN and NSE approval, Diamond Bank would be absorbed into Access Bank. We believe that the new resulting entity will have an advantage in terms of its retail footprint. And although post-acquisition integration may be a challenge, we highlight Access Bank’s experience from its acquisition of Intercontinental Bank.                                       

Nigerian bourse begins week with a 21bps dip                                         

The NSE ASI lost 21bps after recording losses in three of four key sectors. Market breadth remained negative with 20 advances and 21 declines. While investor interest on select stocks remains evident, broad market sentiment has shown little sign of improvement. Thus, we expect another mixed trading session, with a negative tilt.                                             

Stock Watch: DANGFLOUR gained 382bps in yesterday’s session in its second consecutive trading session. The stock is currently at ₦6.80, trading 44% lower than its year-open price and is underperforming the Consumer Goods sector (-26%).                                     

CBN continues with frequent OMO auctions                                              

Yesterday, the CBN offered ₦150 billion and sold c.₦20 billion on the 94DTM, 178DTM and 325DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.28%, 14.45% and 17.31%). Amid continued liquidity constraints, the interbank call rate advanced from 24.57% to close at 36.67%. We anticipate another OMO auction today as the CBN maintains its tight grip on liquidity. Thus, we foresee muted activity in the fixed income market today.