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The Market Today - 20 February 2018

CBN amends dividend policy for banks                                                

The Central Bank of Nigeria (CBN) recently amended its rules governing the dividend payout of banks given their risk profile – captured through capital adequacy ratio (CAR) and non-performing loan ratio (NPL ratio). Previously, for banks with NPL ratios above the regulatory threshold of 5% but below 10% who meet the minimum CAR, the apex bank capped dividend payout at 30% of profits. The amended rules would allow dividend payout of up to 75% for banks with NPL ratios above the regulatory threshold of 5% but below 10%, and with capital adequacy ratio of at least 3% above regulatory minimum. Thus, the amended rules provide greater dividend wiggle room for banks with weak asset quality but stronger capital buffers. We note that the CBN made no other changes to its dividend payout rules – banks with NPL ratio above 10% would still be unable to pay dividends.                                                             

Losses resurface on Nigerian bourse, ASI dips 153bps                                                   

Following a short lived recovery in the previous week, the Nigeria bourse returned to negative territory at week open as Consumer and Industrial Goods stocks dragged the ASI 153bps under. Whilst negative sentiment continues to dominate trading activities, we note that the last minute pull back on the exchange was attributed to two heavyweight stocks. As such, we expect a more visibly mixed trading session today, with bears maintaining the upper hand.                                                

Stock Watch: Coming off a 24-month high of ₦1.92, UNITYBNK has shed 15% over the last five sessions. The stock currently trades at a price of ₦1.63 and has returned 208% ytd.                                                 

Mixed session to open the week for FI market                                                                 

The CBN conducted an OMO auction yesterday, offering ₦60 billion across the 101DTM and 262DTM bills, but made no sale on either bill. Trading in the T-bills space yesterday was mixed with yields trending in opposite directions. Sell offs were more evident in the bond market as yields on benchmark bonds advanced 4bps on average. Given the prevailing tight liquidity, we see little room for buying in the market today, though we expect investors to take stronger positions ahead of the Bond Auction to be held on Wednesday.