I will be posting a chart with the summary of the results later.

Access Bank Q3 2010 Financials (64).

Access Bank Q3 2010 Investors Conference Call Presentation (259).

Access Bank Q3 2010 Press Release (95).

Afrinvest - GT Bank Q3 2010 Earnings Update (81).

Afrinvest - UBA Q3 2010 Research Update (92).

Afrinvest - Unity Bank Plc Q3 2010 Earnings Update (71).

Afrinvest - Zenith Bank Q3 2010 Earnings Update (71).

FCMB Plc Q3 2010 Results Press Release (95).

FCMB Q3 2010 Results (49).

Stanbic IBTC 2010 Reults Press Release (124).

Stanbic IBTC Q3 2010 Results (66).

UBA Press Relase 3Q 2010 Results - 21 Oct 10 (48).

UBA Q3 2010 Results (54).

Vetiva Research - Guaranty Trust Assurance Plc - 2010 (99).

Vetiva Research - Stanbic IBTC Bank Plc Update (121).

Zenith Bank Q3 2010 Group Results Presentation (127).

Here are the top gainers:

Here are the top losers:

Vetiva provides some details on the CBN’s presentation/road-show in the UK in late August. The noted that:
- All write-downs are to be taken in the current quarter (i.e. quarterly results to be released for September ending will feature total provisions for non-performing exposures)
- Results not to feature high profitability margins
- GTBank and Diamond Bank have already accounted for losses as at second quarter of 2009 (i.e. Q2’09 ended June 30, and Q1’09 ended July 31 respectively), so their results in Q3 are expected to be much better than the average performance of most other Banks
- Fourth quarter (ending December) should be strong for Nigerian Banks in general because earnings will no longer be eroded by Non-Performing Loans
Vetiva - Sanusi's Meeting With CNBC Africa - Aug 28th 2009 (287)

One of the most explosive revelations of this entire exercise was the news report by Vanguard in March about the plans to “level” the ground in the banking sector to favour the Northerners and how 5 banks were going to be taken over.
Vanguard March 23, 2009 - The Plan to take over 5 banks (279)

Standard Chartered also prepared an analysis of the events. The pointed out that:
-CBN prints money to fund the initial cost of the bank bailout
-Given the current environment, and the contraction in broad monetary aggregates already underway, this is unlikely to be inflationary
-A diverse range of funding options are open to the authorities
-The hope is that the CBN’s capital injection will be recovered following future private-sector investment in Nigeria’s banking system
Standard Chartered - Nigeria – Paying for the bank bailout - Aug 25 '09 (494)

Proshare NG also provided some analysis:
CB - Dissecting the problems with Nigerian Banks (1902)
Fronteria Post of 4 out of the CBN (211)

Their recommendation is:

While we advise investors to take medium to long term positions in the market, we observe that there are opportunities for short-term trading in the market. In a period like this; full of uncertainties, we strongly advise investors in the capital market to invest only in stocks of companies with sound management and good products that can generate and sustain its cashflows. Such companies can increase investments in the long run. Once recovery starts and the level of confidence in the economy improves, both domestic and international, stocks may not trade at the current prices for many years to come.

The highlights of the document are:

The Nigerian Economy
1. The current global economic and financial crises have serious implications on the performance of the Nigerian economy in 2009 since the Nigerian economy is heavily dependent on crude oil revenue.
2. A huge drop in federally collectible revenue leading to a huge drop in the amount of money to be shared by the 3 tiers of government.
3. The projected drop in the price of oil and other commodities will have a negative impact on the current account position of the country.
4. The FGN is expected to run a budget deficit of over 5% in GDP (current price) higher than the government‘s projection of 3.95% of the GDP.
5. The gross domestic debt is expected to increase by about 35% to N3,132bn from N2,320bn as at December, 2008. This increase will come from the issuance of medium to long term FGN bonds. This will have the effect of crowding out the private sector of the economy.
6. The devaluation move of the CBN, supply bottleneck in the country caused by deficiencies in infrastructure especially transport network, power and high propensity to import, will continue to leave inflation rate at double digit. The range of inflation rate in 2009 is expected to be between 12.5%-14.5% year-on –year.
7. The proposed deregulation of the down stream sector of the oil and gas industry should lead to a lower pricing regime for the petroleum products in the country. This is because of the competition that will set in and the drop in the price of oil at the international market.
8. Prime lending rates in the economy may remain very high as a result of the FGN‘s large fiscal budget deficit in 2009 with its attendant effect of crowding out the private sector.
9. A further depreciation of the Naira to the range of between N150 and N165 to the Dollar in the official market is expected as a result of the massive sell off of financial assets towards the end of 2008.
10. A GDP growth rate of between 4%-5% is possible if the current economic management team can put in place strong economic framework that can support the agriculture and the manufacturing sector especially in the areas of improving infrastructure and access to cheap funds.

Fixed Income Securities
1. The CBN is expected to continue the expansionary monetary policies to increase fluidity in the nation‘s financial market. The combination of uniform end of financial year for banks, and the budget deficit of the FGN in 2009 will drive up interest rate.
2. A cursory look at the FGN Bond issuance calendar for the Q1, 2009 shows that most of the bonds that will be issued in 2009 will be re-opening. Meanwhile, the expected high interest rate will cause the bond prices to drop and lead to an increase in the bond yield in 2009.
3. For liquidity management purposes, the CBN will continue to issue Nigeria Treasury Bills (NTBs) at low discount rates. In view of this, the discount rates on Nigerian Treasury Bills are not an appropriate measure to gauge interest rate in Nigeria.
4. Continued volatility in the inter-bank rates during the year as well as the interest rates trending upwards.

Equities Markets
1. Coordinated fiscal and monetary policies directed at improving the financial and economic health of the nation will set the tone for a real recovery in the equities market. They are confident that the current economic management team will recommend policies that will lay a solid foundation for the economy.
2. While most the stocks quoted on the NSE appear undervalued in terms of current and forecast earnings; based on historical performance, the one year forward attractiveness of these stocks depend on the performance of the macro and global economy.
3. Corporate earnings of companies quoted on the floor of the NSE will decline  in 2009, as a result of high cost of funds, exchange rate losses, and increasing provision for non-performing assets; especially for financial institutions.
4. High interest rates in the money market especially for tenored funds are expected to impact negatively on the equities market especially in the area of low liquidity for trading in equities as funds may likely move to the money market for the high interest rates.

The Naira has lost clost to 50% of its value in the last 4 months.

My main reason for the need for relaxing of the regulations is its effects on the banks. Banks make up a huge chunk of the Nigerian Stock Exchange and are a major employer of labour. When you think of it, banks as a whole, will be the second largest employer of labor after the government (federal and state).

A lot of these banks have secured loans from international finance companies and banks to finance their operations. Most of the time, these loans were secured in foreign currency -  especially dollars.

With the steep decline in the value of teh Naira, these loans cost more. Imagine if a bank secured a loan of $500m last year. That would have been about N60b then. But today, it will be around N90b in today’s real Naira value. This means that these banks will be paying significantly more to service these loans.

The cost of servicing these loans will ultimately be passed on the regular bank customers as increased rates for borrowing from these banks and for lower interest rates for savings.

It will also result in these banks undertaking “cost cutting” measures, most notably downsizing.

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As jara, here is Express Discount’s analysis of the current state of the Nigerian Stock Market.

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FSDH - Q3 2008 Economic Report (Pt 1) (227)
FSDH - Q3 2008 Economic Report (Pt 2) (187)

This is Zenith Securities’ stock market report for last week. Happy reading!
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Shun Companies with Overblown Issued Capital

It is now time for investors to begin to look at companies in relation with their share capital. This is very necessary because if investors really want to make capital appreciation, the quantum of the shares issued by the company is very important. Most of the companies that have low share capital have high value. For example oil companies like Mobil, Chevron, and one or two others in that sub-sector have very high prices because they have very small issued capital. None of these companies have more than 500 million shares in issue. The beauty of this is that whatever earnings they make; they will be in position to give good return. They can give N5, 00, N10.000 and therefore their prices are very high, some of them more than $2 dollars per share.

So, what do you do with a company that has high share capital? If the share is too large, managing it will be a problem and it makes share appreciation so difficult. Recently, one of the insurance companies listed 28 billion ordinary shares on the Nigerian Stock Exchange (NSE).This is too large and in fact, the largest in the history of NSE. The implication of this is that if the company wants to pay 10 kobo dividend, the company will have to pay N2.8 billion. The question is what will be its gross earnings, what is its earnings per share and what will be the dividend declared? Definitely, such companies with large issued share capital may find it difficult to do well in rewarding investors.

How do they go about it? They have to manage that share. How do they manage that share? One of the traditional ways of managing it which is allowed by the law is share reconstruction, and that is why the market witnessed many of it after banking consolidation. Share reconstruction is very important because for the share to make sense for the shares to have value, for investors to make capital appreciation, a company must have low share capital.

Look at the cases of Bank PHB, Access Bank. At a time their share capital was so large and by the time they reconstructed, for instance Access Bank which was less than N3.00 and the moment it reconstructed at 2 to 1 today we are talking of N18.00. So, you see it makes over 200 per cent gains as they reconstructed it to N6.00. If they left it at N3.00, it would take long time to be able to reach N10.00. Therefore, it is good for companies with over blown issued share capital to go into share reconstruction.

The issued of share reconstruction is a troubled one because there is no proper enlightenment about it. Most Nigerian investors are always interested in the volume that is why you see that any time a company declares bonus they go for it even if the price is over blown they will go for it because they believe in volume. But share reconstruction can reduce the investors holding though investors will not like this. It makes sense not to want to reduce their holdings because they believe over a long period when the company is performing well they will make share appreciation.

What we are telling investors is that by reducing the volume of shares through reconstruction does not mean reducing the value. Take for instance all the companies that went through share reconstruction, today they are happy. Take the case of Bank PHB, they reconstructed their shares at three to one and moved from less than N3.00 to around N16.00. Today, we are talking of over N20.00. If you take three, at N3.00 it will give you N9.00 today it is over N20.00. Investors have made more than 100 per cent. Investors have not lost the value but the quantity.

The way we handle share reconstruction is what bothers the market. If it is handled in matured manner, nobody will be worried about it. You have the shares in the system and the next day, you reduce the value and you take your share in the system, there would be no problem. International Energy Insurance handled it well and investors were happy, because the next day you stated to trade your holdings.

But in the situation whereby a company goes through share reconstruction and now decided to withdraw your holding that is already in the system only to issue a share certificate which you may not see in the next three to six months, even some up till now you have not got in the case of the Sterling Bank. This is not encouraging. That is why shareholders see it as rubbing them of their immediate benefit. Why should I have my shares dematerialized only to be told that I have to wait for my share certificate for long time. That is not good for the market. What we are encouraging is that companies should go for share reconstruction but it should be allowed as it was before. If your shares are in the system it should remain in the system, by doing this the share is liquid and investors will reap immediate benefit.

There is another way to it that is allowed in the developed markets but our law does not really encourage it and that is share buyback. This is another way of doing share reconstruction. Instead of reducing shareholders’ holding, a company can buyback its share. In the developed market, you see that Coca-cola does that a lot, and today it enhanced its value by over 200 percent. Go to the New York Stock Exchange you will see the price of Coca-cola going so high.

This is a very good idea that has worked in the developed market why can’t it work here with us. One of the shareholders body, Independent Shareholders Association of Nigeria (Isan) organized an international conference on it last week in Abuja and it is very good. It is very friendly with investors as they are not losing their value. Secondly, it helps the market instead for the market value to keep crashing to below the market value share buy-back can prevent that. I hope the legislature will give it all the necessary support to make it work.

In lieu of this development, UBA Capital Market conducted a research on the effect of this rule studying 17 stocks that had been listed on the NSE over the last year. Here is an excerpt of their report and findings.

On Wednesday, April 23, 2008, the Nigerian Stock Exchange (NSE) directed that any company seeking to be listed by introduction on the NSE shall make 10 percent of its outstanding shares available on the day of listing for market making. The need to ensure liquidity and prevent undue price appreciation arising from trading interference was cited as the primary consideration for the directive. Meanwhile, the NSE had earlier directed that the quantum of shares to be transacted before prices could be moved in either direction shall be 100,000 units.

We believe the NSE’s position was informed by the prevalence of rampant and substantial capital gains recorded by newly listed equities within a short period of listing on the exchange. According to the NSE, the prices of such stocks soared regardless of their fundamentals – and liquidity – which gives a general impression that the stock prices are being manipulated.

In our assessment of the new rules, we considered 17 stocks that were listed on the NSE over the last 52 weeks. On the whole, the basket of stocks increased by 104.19 percent within a month of listing on a cumulative daily volume of 2.8mn units.

Effectively, 65 percent of these stocks doubled within a month of listing while 82 percent recorded capital gains in excess of 50 percent within the same period. The foregoing underscores the fact that when companies are listed by introduction, the shares are not readily available to the public but held in the hands of a relatively few number of individuals and corporates, especially for companies that have done private placements. Therefore, the subsequent scarcity of the shares upon listing drives up the price regardless of the company’s fundamentals.

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Why insurance stocks should be your long term choice
by GODFREY OBIOMA

An investor who had taken positions in insurance stocks early in 2007 and sold them late in the year or even early this year made a harvest through capital appreciation. That was because many insurance stocks rallied on the injection of capital through the consolidation exercise and perception that the sector would follow the earlier trend in the banking industry. At the end of the February deadline, many short term investors had rode on the back of the euphoria to anticipate a roller coaster trend. But the story has changed. Investors are now more interested in fundamentals, like earning and profitability. Except for a few, results coming in from that sectors, are not too impressive to drive up prices appreciably. Although there have been improvements, discerning investors think it is not yet uhuru for speculators.

The insurance market in Nigeria is small with low growth . About 70 percent of premium is distributed between marine, general accident and motor insurance policies.. A study by Afrinvest West Africa shows that gross premium increased just by 17.5 percent between 1996 and 2005 and 15.3 percent between 2003 and 2007. The company estimated total market size of N98.8 billion (US$844 million) in 2007. Penetration is low, in the insurance market, with lowest level of market depth in the life insurance product. Afrinvest research shows that of the 20 million people in formal and informal employment across the working population, less than 1million currently hold personal insurance policy.

Compared to banking , securities market and asset management business, the insurance sector is slow with very low inflation adjusted growth in the last 10 to 15 years. To address these problems, .the Federal Government, in September 2005, announced new minimum capital requirement . According to National Insurance Commission ( NAICOM),, the capital requirement for life insurance was increased from N150 million to N2 billion; general insurance , from N200 million to N3 billion while reinsurance was hiked from N350 million to N10 billion.

There is however silver in the horizon as the consolidation exercise has strengthened many insurance companies, created a lot more confidence in the sector. Besides, the economic reform which has boosted economic activities , is expected to drive increase in insurance business. while the increase in bank lending would enhance corporate and industrial insurable assets and gross premium..

Following the consolidation exercise, insurance companies have grown their shareholders funds. Leadway Assurance, for example , has shareholders fund of N9.4 billion; WAPIC Intercontinental N9.3 billion; A11CO N5.9 billion; Niger Insurance N5.5 billion; Gold link N5.4 billion; and Mutual Benefits N4.0 billion.

On the floor of the stock exchange, many insurers have demonstrated strength as their market capitalisation are fairly okey. WAPIC Insurance has market capitalization of N53.5 billion, Goldlink N48 billion; Niger Insurance N37.0; LASACO N34.9 billion, International Energy Insurance N34.9 billion and Cornerstone N30.5 billion..

Insurance companies have some of the highest price earning ratios showing high investment returning period. Notwithstanding, a number of them , are matching the record of banks in this area. The companies with some of the lowest PER are Prestige Assurance with 27.9 billion multiples; NEM Insurance 27.9; International Energy Insurance ;WAPIC Intercontinental 31.8 and Royal Exchange Assurance 35.1.

In terms of gross premium, Leadway has N5.7 billion; WAPIC Intercontinental Insurance N3.2 billion; Niger Insurance N3.1; AIICO N3.0 ; Cornserstone N2.7 billion; Royal Exchange Assurance N2.4 billion; Mutual Assurance N1.9 billion and Staco N1.7 billion.

The new capital levels and mandatory local content policy as well as the compulsory group life assurance under the pension Act are also expected to stimulate growth in the sector.

There are strong indications that some underwriters are tilting towards non insurance businesses like stock market investment, real estate, and oil and gas, which, although detract from , the objective of instilling professionalism in the sector, may on the long run grow bottom-line and investors’ returns.

With so much money pooled by insurance companies, the continuing economic reforms and opportunities for growth in earnings, the market is very bright for insurance stocks and long term investors are likely to reap the good returns.

Here is the analysis:

Implications of Share Price Movement Rule
About three weeks ago The Nigeria Stock Exchange (NSE) came out with new rules regarding the price movement on the exchange. The new rule has it that as against 15,000 that was required for stock-brokers to trade to be able to move a stock price either up or down, they will have to trade 100,000 units to be in position to do so now. The NSE also said that any company was coming to list through introduction must has been roundly praised by the market.

Also, the Securities and Exchange Commission (sec) has been receiving praises for investment six companies and consequent suspension of two of them on the allegation of price manipulation of their shares. The Nigeria Stock Exchange (NSE), where the companies were listed was not pleased with the way sec carried out the suspension of the two stocks from the market activities

The suspension created some kind of bad blood between the two authorities before the situation was managed in the interest of the market. Now, the issue of unbridled price movement on the exchange is said to have had a direct bearing on the action of the apex capital market regulator and many market analysts believe action of  NSE at coming out with the new rules would not have been contemplated had it been that sec did not wield the big stick.

The Implications of the new NSE rules on the market
Mallam Kasimu Kurfi, managing director  and chief executive officer of APT securities and Funds limited said: ’’Let me start by emphasizing that this is one of the good developments in  the market .This step shows that the regulatory authorities are up and doing and this is a welcome development for the market. I have to take you back to 1975. At that time, the maximum a stockbroker could add to any stock was 20 kobo.

By 1997, our stocks started to hit N70.00. Oando hit N70.00 and one begins to wonder that a stock of N70.00 what would 20 kobo price movement mean to it. Twenty kobo is not up to one percent. So, at that time the regulatory authority changed the rules and the rules and percentage was introduced to it. By 1997, five percent was the maximum a stockbroker can move a stock up or down. That was a welcome development because at that time, a stock of N70.00 if you are talking of 5 percent that stock would increase by N3.50 in a day as against 20 kobo before.

Then let us look at the way it was with the volume. Initially, you could move the price of any stock by any quantity. By 1997, the regulatory authority ensured that you could not move the stock price by any quantity. Before that is done, the quantity should be reasonable. It must be a minimum of 5,000 but later it was moved to 15,000 and currently, the regulatory authority has come out with a new rules which says you can’t move any stock if the total volume are bidding or offering is not up to 100,00 units.

The beauty of this kind of rule is that it ensures there should be a reasonable quantity to move the price up or down. Therefore, this would ensure that stocks should not be punished unnecessarily and the stocks will not be over priced and those junk stocks and penny stocks may not hold sway again. This is so because most of these penny stocks’ total issued share capital is not up to 100 million and, therefore, the quantity traded is minimal.

One will begin to ask question on why a stock keeps on gaining 5 per cent and the quantity traded is just 15,000. It was like that because that was the rule. Once a stock can trade 15,000 units, it can move upward or downward. But the funny side of it is that the stock will be trading only 15,000 and be gaining 5 per cent and other brokers   will be watching .A client will tell you buy me this stock and you cannot get it. However, with this new development, a stock can only move up or down with a minimum of 100,000 thousand units. This will bring liquidity to the   market because what we are saying is that those stocks that are very scarce will neither go up or down; they’ll be stagnant and nobody rule is the way it affects private placement.

It is a common knowledge that most of those companies that went for private placement come to be listed on the exchange by introduction. You find that immediately after listing, the price keeps rising because the quantity is not there. It is almost drying up very scanty until the price triples before you begin to see some quantity coming in. Now, the NSE says no.

If you are coming by introduction, so be it, but on the day you are going to be listed, you must offer 10 per cent of your issued share capital and that will make the stock liquid and that will make stockbrokers to be able to get enough quantity and you will see the most of the investors who want to buy it even from day one, will get it.

How Stakeholders See The New Rule
Faruk Umar, the president, Association for the Advancement of the Rights of the Nigerian Shareholders, said the actions of the NSE in that direction are quite in order.

He said that these companies have learnt to carry out private placement and then list the shares on the Exchange as a way of increasing the share prices of their stocks. ’’It has become a tradition among these companies to come to the capital market for fresh funds they raised previously. This will stop some of them who do that merely for price increase from moving  share prices any how,’’ he said.

He supported the decision of the Exchange that any company coming to the Exchange for listing should make 10 percent of the shares to be listed available for trading as a matter of fact. Umar said the NSE is right in stopping companies from accessing the capital market for fresh funds twice in a year. ‘’I also support the regulation that 15,000 units will no longer be enough to make a stock move its price. The 100,000 units peg by the Exchange is quite in order because it has become easy for the operators to raise 15,000 units as they want. It is however, not very easy for the stockbroker to immediately raise 100,000units just to change share price, ‘’he said.

According to Mr. Gbenga Idowu, national coordinator shareholders united front the new rule would impact the market positively. On whether it would have negative effective on the Emerging Market sub-sector where many indigenous sponsored companies play as most of them do not trade as much shares that would help their price grow, he said that if they have been performing well everybody would be patronizing them and they would not have been focusing too much on the issues of capital whereas what they should be focusing on is how to improve on the quality of their products. This would make their product acceptable and invariably that will make their stocks acceptable to Nigerian investors. The rule is for the good of the market in whatever way it affects any sector, the players should brace up to the challenges”, he said.

The Genesis of The New Rule By The NSE
It was February this year that sec announced that it has begun investigations into the activities of six companies over allegations of price manipulation and other sharp practices aimed at ripping off investors. It gave the names of the affected companies as African Petroleum Plc (AP); Big Treat Plc; Afroil Plc; First Aluminum Plc; Capital Oil Plc; and IPWA Plc.

It vowed to deal decisively with any operator found culpable of price manipulation or insider dealing. Was a criminal offence in the capital market and urged them to always operate within the confines of the rules to ensure transparency and integrity of the market.Mr Lanre Oloyi, head of media of sec said: “The decision of the suspension of trading on Afroil Plc and Capital Oil Plc was a fall out of the investigation recently conducted on these two companies, due to observed astronomical rise in the share prices and the fact that they were not rendering necessary statutory reports.

“The investigation established that during this period they were not in business, as there was no activity whatsoever in their premises,”said sec. The commission said the suspension was to protect the investing public. It said its investigations showed that Afroil accessed the capital market in 1993, through an initial public Offer (IPO) for subscription of 165 million ordinary shares of 20 kobo, at 40 kobo per share. The offer was undersubscribed by 42.26 per cent or 69.73 million shares, which were warehoused for subsequent disposal on the exchange .

It said between 2001 and 2006, the company was wound up by a Federal High Court Lagos order, dated March 30,2001 following its inability to pay its debts, pursuant to the provisions of the CAMA 1990. But the winding up order was vacated in March 2007, following the decision of KS Fund Managers Limited (one of the creditors) to take over the responsibility of paying other creditors, while the company was returned to KS Fund Managers. The warehoused shares of the company were in custody of the company’s management.

For instance, a stock brokerage firm sold 20 million units of the warehoused shares from April 19 2007 to December 6, 2007 at prices ranging from N2.20 TO N6.47, while another firm sold nine million units between December 21, 2007 and January 24, 2008 at the price range of N9.12 to N13.76 per share. Even during the investigation of the company. It was discovered that a new mandate order was given by the company management requesting the sale of another 11 million units,”SEC said. According to the commission, the sale of the company’s warehoused shares within this period is quite anomalous, as it ceased to be a going concern between 2001 and June 2006 while it returned to going concern status on March 3, 2007.

“The commission, therefore, noted the actions of the management of Afroil Plc as acts of insider dealing and price manipulation, and therefore, a breach of rule 110 of the commission’s Rules and Regulations. In addition, the manner of the sale of the company’s warehoused shares was a total breach of the provisions of Rule 70(2) of the commission’s Rule n Regulations, which states that warehoused shares be sold en-bloc, while the broker renders periodic reports on it, “sec declared. The commission said the investigation revealed that the investigation revealed that capital oil plc has similar antecedents with Afroil plc. The only exception is that no evidence was discovered to prove that capital oil went into liquidation but the company was not in active operation and only occupies an obscure office accommodation in Ikeja, Lagos.