unite4real:


I cannot help but laugh how the mark down of Transcorp hotel will be like. Removing 20k from 9700k is insignificant.

Unfortunately pushing the price back down is a tall mountain considering you need 100k units of which it appears the small players don't have.
Transcorp hotel above N10 is not a good buy for me. So at N97, it's unthinkable

unite4real:


You only have to be skilled in knowing when to jump out else you get trapped and be coming out everyday to place your sell order and hopefully getting less than 3% of your holding getting filled.

onegentleguy:




Honestly, your concerns are valid!
But look at it this way; If the component of RE (retained earnings) is included, the proportion of equity financing needed to boost the banks share capital to appreciable levels in line with current economic realities will be insufficient.

Some class of share capital particularly RE, could imply the incorporation of certain fragments of "risky asset" that can be deemed unsustainable. (ref: that from the recent spate of Fx revaluation gains)
RE can be an indirect beneficiary of these sought of gains.
While this takes nothing away from the RE position of shareholders (that's sacrosanct), it would in this instance, be better not to incorporate it.

Again, by excluding these components, the CBN can seek to find the right balance on the "dislocation" between Naira asset pricing and the present economic reality. DBMs are key to finding that balance!
These key points underscores the need for banks to raise enough funds. ...they really need to and like I once said, it's actually long overdue.

To give this a bit of context; compare the Fx-N differential/PPP between the last time we had a banking sector recapitalization in 2006 (during the Soludo era) and now.
...a brief;
2006: Minimum cap requirement was N25B @ N130+/$... which is approx $193M.
2024: Proposed minimum cap requirement of N500B @ N1,300+/$ (a 9x multiple from 2006)... will be less $380M.
So the actual raise in capital base will essentially be by a multiple of 2x (380/193) when infact our currency has depreciated by over 9x (i.e 1--130/1,300) within the same timeframe.

Notice how I had only used N500B, the min cap requirement for DBMs with international spread (mainly the stronger banks) for this example. Now imagine if we zoom in on the smaller banks.
This should put to bed the debate in some quarters on whether the proposed minimum capital is too big. But for anything, I think it's even a bit small. Now imagine if the CBN allows for the incorporation of other components aside paid-up capital and share premium.
That would reduce the difference between what is required and what they have and imply less capital raise, when in reality, the banks actually need more... otherwise, the economy "might have to pay for it" sooner or later.

There's a reason no Nigerian bank is among the top 10 largest banks in the African continent. So much for the self acclaimed "African giant"!
As at 2023, the 10th on the list, South Africa's Investec Bank has a capital base of near $30B. Not sure if all the quoted banks in Nigeria can match that!
Top on the list is also South Africa's Standard Bank (group) with a capital base of $172.9B. (South Africa dominates the list with no fewer than 5 banks in the top 10)
Part of the reason for the unworthy cap base of Nigeria banks can be attributed to the many years of underpricing of banking equities. But then again, we know it's broadly a deliberate "set-up" so certain cooperate criminals in the financial services industry and their cronies can continue to thrive.
Now banking coys are surging in price. Perhaps the wide gap between RV & MV will close on their journey to real price discovery but whether that will be sustained or if it's just another flash in the pan occasioned by the planned recap exercise would be a different kettle of fish.

On a side note, I align with those who also see the recap policy as a strategic move by the CBN to continually tighten system liquidity (justified by the recent high rates in the FI market) and reduce Naira volatility by closing the gap btw capital flight and Fx inflow.
Perhaps the Naira could strengthen a bit more from current level and hopefully find a balance around it... which should help with the long desired exchange rate clarity and spur confidence towards Naira assets.

Overall, I think the policy spells good for the economy and by extension, the market.
Aside banking coys, some select asset names will do well!

CAVEAT: The entirety of this post is merely the view of the writer. ...no part of it should be inferred as an investment advice/guide.
Due diligence still applies as always.

It is well

chillykelly86:


Thanks OGG for weighing in on this.

I think we all agree on the need for recapitalization. The bone of contention is proper valuation of the existing business. Forex revaluation gains should be credited to a reserve in Equity and not to retained earnings. Retained earnings should be 100% shareholders funds.

Recapitalization is a serious business that may involve entry of new investors. I don't know what informed their decision to limit it to share capital and share premium. I expect shareholders' associations to reject this. They could have said minimum shareholders' funds #2 trillion or whatever reasonable amount they feel will compel all banks to raise money or embark on M&A.

Whatever happens though, there's money to be made. We should get more clarity with time.

chillykelly86:
https://nairametrics.com/2024/03/29/recapitalization-bankers-oppose-cbns-exclusion-of-retained-earnings-in-calculating-minimum-capital/

onegentleguy:


This article highlights some of the things I mentioned earlier.
Notice the part the reads; "With the exception of Sterling Bank, none would require additional capital raising if retained earnings were recognized as part of share capital."
I did state (in a previous post) that incorporating the RE component would reduce the difference between what is required and what they have and imply little or no capital raise, when in reality, the banks actually need more funding... otherwise, the economy "might have to pay for it" sooner or later.

Also notice the part that reads; "It seems that the Central Bank is prioritizing direct capital injections into banks rather than relying on accounting entries to satisfy recapitalization requirements."
This is very true!

I also agree with the writer's assertion that; "Although the Central Bank has permitted mergers and acquisitions, this suggests it anticipates that some banks might struggle to meet the new capital requirements"
This is the part I dislike about the whole exercise. It smacks off of biase on the part of the apex bank. (think @ Frangel also mentioned this)
Not fair that a bank like UNITY and it's likes would have to "dine from the same table" as GTCO, ZENITH, ACCESS etc.

Enough of the recap policy talk.
As always, the focus should be on how to tap from the opportunities it will present/create.
We'll see how the market reacts to the policy in the course of time.

It is well

maishai:


Sometimes in recent past I was privy to a set of lawyers that negotiate big ticket transactions.....I was made to understand that the likes of Gt, ACCESS and ZENITH being muscled out of big ticket transactions by the likes Citi in the Nigerian space is becoming imminent........

This recapitalization exercise is a way out for our banks to breathe again because even with at least 10% local content policy,if they are poorly funded they cannot participate in some Hugh transactions in oil and gas, communications and digital economy......

Anyway, it's still the likes of citi, standard and Morgan that will still inject their funds into the banks through proxies........

All in all, money is being made and will be made, its just being privy to good information and making a good analysis and coming out with an informed judgement

The next 24 -36months will create billions that will trickle down to retail investors like

yMcy56:
Happy Easter to all!
Let's not forget the message of Easter.....which is message of God's love and Salvation to the world. 😊

Meanwhile, TRANSCORP POWER is out!
- Dividend of 23.46bn declared for 2023 FYE
- More than half of this goes to TRANSCORP PLC

https://doclib.ngxgroup.com/Financial_NewsDocs/40773_TRANSCORP_POWER_PLC-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf

yMcy56:
Happy Easter to all!
Let's not forget the message of Easter.....which is message of God's love and Salvation to the world. 😊

Meanwhile, TRANSCORP POWER is out!
- Dividend of 23.46bn declared for 2023 FYE
- More than half of this goes to TRANSCORP PLC

https://doclib.ngxgroup.com/Financial_NewsDocs/40773_TRANSCORP_POWER_PLC-_QUARTER_5_-_FINANCIAL_STATEMENT_FOR_2023_FINANCIAL_STATEMENTS_MARCH_2024.pdf

ogoo4real:


"More than half of this goes to Transcorp PLC" Please explain further for us @yMcy56

Mpeace:
Abeg make una break down the result. I see eps of 92.25 from 30billion Profit after tax. I thought their OS is 7.5billion. How eps come climb to 92naira?

Dividend fit be like N3. (I no want laf)

Btw transcorp have been chopping this kind dividend yet paying 2kobo to its shareholders yearly.

Mind you transcorp have so far sold units of transpower worth over 100billion on the floor of the exchange. Abeg make them share that one for us.

Mpeace:
Abeg make una break down the result. I see eps of 92.25 from 30billion Profit after tax. I thought their OS is 7.5billion. How eps come climb to 92naira?

Dividend fit be like N3. (I no want laf)

Btw transcorp have been chopping this kind dividend yet paying 2kobo to its shareholders yearly.

Mind you transcorp have so far sold units of transpower worth over 100billion on the floor of the exchange. Abeg make them share that one for us.

emmanuelewumi:



EPS of N4.00k.

Divide N30 billion by the outstanding shares of 7.5 billion

Mpeace:
But the result says otherwise

emmanuelewumi:



EPS of N4.00k.

Divide N30 billion by the outstanding shares of 7.5 billion

Adinije:
DS on full offer? Any -ve news ni

SonofElElyonRet:


The results clearly say N92.25k eps


Can someone help explain the interim dividend declared for 2022 and 2023...
*why interim?
*will new shareholders who bought after listing on the stock market be entitled to both 2022 and 2023 interim dividends?

leparj:
Africa Prudential Reg dividend just
entered.

BabsO2:



Has it. I have not got it.