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GCR Affirms FBN Merchant Bank Limited’s A-(NG) Rating

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GCR Affirms FBN Merchant Bank Limited’s A-(NG) Rating

By Modupe Gbadeyanka

Local rating agency, Global Credit Ratings (GCR) has affirmed the national scale ratings assigned to FBN Merchant Bank Limited of A-(NG) and A2(NG) in the long and short term respectively, with the outlook accorded as stable.

GCR said it accorded the above credit ratings to FBN Merchant Bank Limited (FBNMB) after it successfully operated as a merchant bank for the full year 2016, having converted from Kakawa Discount House Limited (Kakawa) and subsequently becoming a member of the FBN Holdings Plc.

Also, note is taken of the significant change at the top management level to drive the new merchant banking strategy.

While FBNMB intends to explore all the permissible activities under merchant banking operations, it is yet to fully implement its strategic plan. As such, the bank is considered to be in an initiation stage.

Shareholders’ funds increased 4.0 percent to N29 billion at FY16, ranking as one of the highest among peers and ahead of the regulatory minimum of N15 billion for the subsector.

The bank’s capital adequacy ratio is considered strong at 22.6 percent, against a regulatory minimum of 10 percent.

The bank’s regulatory liquidity ratio ranged between 58.5 percent and 84.6 percent in FY16 and averaged 74.4 percent for the period, against the 20 percent regulatory minimum for the subsector.

Furthermore, cash and equivalents totalled N22.9 billion, representing 16.8 percent of the asset pool at FY16.

Furthermore, a sizeable 86.8 percent of the investment securities were placed in tradable treasury bills and Federal Government of Nigeria bonds.

Asset quality metrics improved significantly in FY16, as the non-performing loan (NPL) ratio reduced to 3.4 percent, from 12.2 percent in FY15.

While cognisance is taken of the fact that all NPLs were from the discount house operation, management has also informed GCR that these only relate to two obligors, one of which made a partial settlement in FY16.

Although FBNMB reported an improved profitability at the pre-tax level (which grew 28.5 percent in FY16), profit after tax was a lower N4.9 billion (FY15: N6.6 billion) as the bank had benefited from tax credit in FY15. The bank recorded 21.1 percent growth in total operating income, largely supported by non-interest income (comprising fee and commission income, foreign exchange revaluation gains as well as investment banking activities).

However, operating expenses also grew 39.5 percent on the back of ongoing structural adjustments and an increase in staff strength. The cost to income ratio is considered moderate at 39.8 percent.

Consequently, return ROaE and ROaA stood at 17.3 percent and 4.0 percent respectively in FY16 (FY15: 29.2 percent and 6.6 percent respectively).

Furthermore, performance in 1Q FY17 reflects a significant improvement from that of the same period in FY16, albeit behind budgeted figures. Note is taken of the fact that budgeted figures for FY17 appear optimistic.

The rating may be adjusted upward following a sustained improvement in profitability and asset quality. However, it may be negatively impacted by a deterioration in asset quality metrics, liquidity and or the capitalisation level.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Economy

NGX Upgrades Price Stock Group of Eterna

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price stock group of Eterna

By Dipo Olowookere

The price stock group of Eterna Plc has been moved upward by the Nigerian Exchange (NGX) Limited, Business Post reports.

In a regulatory notice on Monday, the bourse noted that it upgraded the stock category of the energy company from a low-price stock group to a medium-price stock group.

This action, according to the exchange, was necessitated after the stability in the price of the company’s equities within four of the last six months in the new price category, in line with its price methodology framework.

“Equity securities of quoted companies on the exchange (NGX) are classified into three stock price groups or categories; high-priced, medium-priced, and low-priced stocks, based on their market price.

“In this regard, securities must have traded for at least four out of the most recent six-month period within a stock price group’s specified price band to be classified into the category.

“Accordingly, a review of Eternal Plc stock price and trade activities over the most recent six-month period provides the basis for reclassifying the security from the low-priced stock group to the medium-priced stock group.

“This reclassification also necessitates the attendant change in the tick size change from N0.01 kobo to N0.05 kobo, in line with Rule 15.29: Pricing Methodology, Rulebook of the exchange, 2015 (trading license holders’ rules),” the statement from the platform stated.

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Economy

Unlisted Securities Investors Gain N18.29bn in Five Days

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unlisted securities investors

By Dipo Olowookere

It was another positive week for unlisted securities investors in Nigeria as they smiled home with N18.29 billion last week on the floor of the NASD over-the-counter (OTC) Securities Exchange.

This was buoyed by the 1.98 per cent week-on-week growth recorded by the alternative bourse in the country during the five-day trading week, which had five stocks closing on the gainers’ chart, with none on the opposite table.

Data harvested by Business Post indicated that FrieslandCampina Wamco Nigeria appreciated by 10.44 per cent to settle at N69.00 per unit. UBN Property Gain 7.14 per cent to trade at 75 Kobo per share, Niger Delta Exploration and Production improved by 6.95 per cent to N200.00 per unit, Geo-Fluids rose by 6.12 per cent to N1.04 per share, and Central Securities Clearing System (CSCS) increased by 3.85 per cent to N13.50 per unit.

In the week, the volume of trades declined by 35.51 per cent to 24.5 million units from 62.6 million units, the number of deals went down by 12.82 per cent to 66 deals from the preceding week’s 71 deals, while the value of transactions increased by 122.48 per cent to N96.6 million from N87.6 million.

The most active security for the week by volume was Geo-Fluids, with the sale of 20.0 million units, followed by UBN Property with 3.4 million units. FrieslandCampina traded 581,021 units, CSCS transacted 375,512 units, and VFD Group exchanged 111,104 units.

However, the most active equity by value for the week was FrieslandCampina, with a sale of N38.5 million. VFD Group recorded N27.2 million, Geo-Fluids traded N20.7 million, CSCS transacted 5.1 million, and UBN Property traded N2.6 million.

Data showed that the NASD unlisted securities index (NSI) increased in the week by 13.92 points to 717.15 points from 703.23 points, as the market capitalisation grew by N18.29 billion to N942.35 billion from N924.06 billion.

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Economy

Nigeria’s External Reserves Shed 0.14% to $37.020bn

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Nigeria's external reserves

By Aduragbemi Omiyale

In one week, Nigeria’s external reserves depreciated by a marginal 0.14 per cent to $37.020 billion from $37.070 billion in the preceding week.

Data obtained by Business Post from the Central Bank of Nigeria (CBN) disclosed that the balance in the coffers was as of Thursday, February 2, 2023.

The FX balance in the country’s purse was supposed to expand during this period when prices of crude oil were relatively stable, but this has not been the case because of low production.

Nigeria relies heavily on the sale of crude oil to earn forex, which is currently scarce in the country, putting the Naira under pressure.

The federal government has blamed low crude oil output on the theft of the commodity and has promised to make efforts to address the issue.

Recall that in August 2022, Nigeria’s crude oil production plunged below one million barrels per day (972,394 bpd), the lowest ever in several years.

However, according to the Organisation of Petroleum Exporting Countries (OPEC), the output improved by 171,000 barrels per day in November to 1.186mbpd, though about 700,000 barrels per day less than its quota for the month.

The Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, said the federal government plans to improve the country’s crude oil production to 1.6 million barrels per day by the first quarter of 2023.

It is believed that this would boost the FX earnings of the nation and bolster the reserves and the local currency in the foreign exchange market.

Last week, the Nigerian Naira depreciated against the United States Dollar on a week-on-week basis by 25 Kobo or 0.05 per cent to N461.50/$1 compared with the preceding week’s N461.75/$1.

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