@poster,
The cautious value of your post is very much appreciated,however the depth of your arguments maybe marginally faulty.

Banks are currently raising capital partially to meet up with CBN's paid up requirements for handling Nigeria's foreign reserve($1bn) and of course achive whatever long term strategic objectives they may have.

When quoting foreign markets,statistics always try to put them in the proper context/perspective.

Sweet T,
              Thanks for your observations and  great advise.

i strongly dis agree with the fact that one shold be careful with the banks public offers. if i am to advice, if u have money to pick all of them, do bc u will not have regrets in the long term. the market is deepening as the public offers are emerging, it increases our total market capitalisatuion, and also drives up the all share index. with all this on ground, its a significance of a growing economy.

as for banks cooking up their reports, i am a forensic accountant, and i know banks that do that. none out of the 25 banks in the country.

Nuff said all!

More than ever, retail investors (esp beginners) need to seriously thread carefully with the avalanche of IPOs/POs being churned out daily like no man's business, in order not to get caught out if market sentiments for banking sector change (and they really do!!! - Remember Building sector - mid year; Insurance sector lately etc).

For safe & successful investing, one's ability to fundamentally stock pick these IPOs etc (ignoring all the PR stunts etc - remember First Bank POs) and hedge one's exposure by buying other defensive stocks (Flour Mills, Wapco etc) are paramount. So, shine your eyes well!

@ Mimiko "my advice for now is that if u re going to invest look for the big names and UBA is out of it to me that bank has transfromed with the help of Chicka Mordi and so on God help us sha"

I'm a bit confused byu this part of your post. Are you saying UBA is good for investment or bad? Please clarify/

while i agree that investors should INVEST CAUTIOUSLY, i dont subscribe to allegation without proof. The results being posted by the various banks may not be realistic due to CREATIVE ACCOUNTING AND WINDOW DRESSING. cases are abound- Access bank, Diamond Bank, IBTC chartered Bank, among other banks had their audited accounts QUALIFIED by their various AUDITORS. reason was that 'THEY FAILED TO WRITE OFF THEIR GOODWILL TO THE PROFIT AND LOSS'. Had they done this, their profit would have reduced to the value of the amortised goodwill and net assets reduced by the same amount.

It is also on record that the banking sectors accounts for nothing less than 60% of transaction at the capital markets. it therefore means that, should there be any "HIT" on that sector, the capital market may crash (GOD forbid). I have always posited that the Nigerian Stock Market is INEFFICIENT and CREATIVE ACCOUNTANCY is rampant. this being the reason for certain share prices nose driving while the operation of the companies are nothing to write home about.

on the issue of the MD being questioned for fraud, am aware that the former MD of Omega bank is being questioned in that regards, but i dont think it has anything to do with "STOCK FRAUD". Another that i know of is the board of Spring bank that was sacked some months back.

In conclusion, every investment has it associated risks. we must evaluate our risks before investing our fund. If you require the service of a financial analyst, please contact tunde at canaan.partners@gmail.com

Sweet T has a point, I suspect that the books may be being cooked, but at least the banks do produce Income statements and Balance sheets, most of the other companies in NGSE either do not produce or have out of date income statements and balance sheets, so who knows whether to trust their financial ratios or not?

@ crownvilla
am just saying UBA dont seem big to me anymore in terms of security

@ Sweet_T

You have expressed what you think, and you have the right to think anyhow you wish, but when you propagate your thoughts as facts to an audience of investors, you had better be equipped with figures for back up. So, far you have none and this thread you have created have only succeeded in diverting energy from analyzing reports, declared earnings and potential earnings, to discussions that gender fear. The same fear that kept many in poverty until they decided to take their destiny into their hands and run.

well,i see some peeps thinking along my line of thought.i go along with a lot of posters here about their reservations.i'll also say that the banks including their MD's have turned it into an ego thing.
they are more concerned with collecting int'l accolade's.biggest this,biggest that, i'll say thats rubbish.
cos this same rating agencies caused the squeeze in the US now.
can u imagine zenith sourcing for funds 3 times in 3yrs.am not sure they know what they are doing.again there's artificail inflation of share prices in the NSE.insider trading is rampant.there are so many things wrong with our NSE.mayb now it'll be more difficult to create artificial scarcity to push up prices with the deployment of the fully automated system in the NSE.i just hope heart attacks will be lessened,

Here lies the truth in any form of investment to be undertaken,the higher the risk the greater the reward and vice versa. But it paramount to note that calculated risk is required.

Analyse the coy financial statement for a good period of say 5yrs: profit before tax/ profit after tax, bonus declaration e.t.c. The aspect of bonus issuing is very important, a coy declaring a bonus will need to adjust its share price in order to compensate for the deficit arising from the bonus issued.

If you buy before the declare you dont partake you lose out of the benefit, thereafter share price plummet.

To end i will say invest wise, carry out a thorough research of coy profile, if in doubt consult an expert.

Thanks

@socrates08; dont you think you are contradicting yourself as most of the case coy stated above involved american coy under the nose & watchful US regulatory bodies. If this could happen under such so called tranparent economies and not be discovered until after immense damaged has been done; then we should not discount the NSE or the Banks. Whilst investing there is always the caveat- "You should not invest money you cannot afford to lose". Even if there are proven case of proven book cooking in NSE; that does mean that every coy in the NSE is bad or should keep people away from NSE as people are still investing in the american markets.

Also below is an excerpt from the punch today attributed to lagos Gov in regards to lagos state becoming a mega city- this shows that there are projects that can be financed by these banks that will yield good ROI
He said, “Our detailed and meticulous studies show, for instance, that an investment of $100m in the infrastructure needed for our Bus Rapid System will yield an annual revenue of at least $50m.

“And about $787m will be required as investment in our rail transportation infrastructure, with projected annual revenue of $400m.”

I'm no expert on stucks but i feel there are too much IPOs with less pple willing to buy. I'm not sure some of these banks record up to about 50% subscription.
The issue of certificates is also another problem, irrespective of the fact that they come late, some end up not geting them at all.

Joey82:

I'm no expert on stucks but i feel there are too much IPOs with less people willing to buy. I'm not sure some of these banks record up to about 50% subscription.
The issue of certificates is also another problem, irrespective of the fact that they come late, some end up not geting them at all.

I strongly support you. I believe with time everything will change for the better.
Peace.

HI SWEET T,
THANKS 4 UR CONCERN. BUT THE STOCK MARKET IS 2 LARGE 2 BE SATURATED.
STOCK BUYERS AND INVESTORS, PLS BUY FCMB SHARES, THEY ROCK.

PLS CONTACT ME IF U WANT TO BUY ON 08034502927 FOR RESIDENTS OF ABUJA.

OFFER LASTS TILL 13TH NOV, 2007.

THANKS.

Nigerian banks have not capitalised enough. The funding Gap required by Sub-saharan Africa in order to transform to a developed Economy is huge. I wish the money can be raised internally (i.e. Nigerians and African Home and Abroad) as against foriegn funds who may have no genuine faith in growing us. But merely speculating on the bull run of our growth. The only caveat is Bad Government and Curruption in both Government and the Private sector just as the fulsification of records by Cadbury may make projected growth stunted. The best edge is to spread the bet.

Take the Lagos Megacity project quoted earlier by @ btayo1 the investment opportunity is there.

Further insight can also be picked up by going through this article from the banker

==============
* Supplements » Africa » Nigeria: Great Expectations

Published:
02 April, 2007

Chukwuma Soludo: expects debt ratio upgrade

Chukwuma Soludo, governor of the Central Bank of Nigeria, tells James Eedes of a bold plan to raise $1bn for his brainchild – the Africa Financing Corporation.

One thing you would not accuse Chukwuma Soludo of is lacking momentum. The governor of the Central Bank of Nigeria (CBN) has energetically stuck to his economic reform agenda when others in government and the private sector have retreated to the sidelines ahead of the country’s April 21 election.

Most recently, Mr Soludo was in London and New York drumming up interest in his latest brainchild, the Africa Finance Corporation (AFC). In characteristically bullish manner, the governor was seeking seed capital for the institution from international investors despite there being no management team in place.

It would not be the first time Mr Soludo has confounded the sceptics – the governor famously overcame staunch resistance to his plan to restructure the Nigerian banking sector, despite serious doubts he would meet his own unlikely 18-month deadline. Ahead of elections in which no-one is betting on a winner, there are few who do not worry what the outcome holds for the country and the momentum of reform.

Speaking to The Banker in London, Mr Soludo [size=8pt]dismisses such fears[/size], insisting the direction of reform will not change. “The economy has the capacity to sustain growth of more than 10% in the medium term,” he says, citing Nigeria’s improving business environment, abundant natural resources, large tracts of uncultivated agricultural land, and the increasing interest in the country being shown by the estimated 17 million Nigerians living abroad.

Authorities estimate the economy grew at 5.6% in 2006. Although slower than the year before, the underlying structure of growth is healthy: oil sector output shrank by 4.7%, owing to unrest in the important oil producing Niger Delta, but the non-oil sectors grew by 8.9%.

With steady improvement in a number of performance indicators, Mr Soludo also expects an upgrade to the country’s sovereign debt ratio, currently rated BB- by Standard & Poors and Fitch.

Mr Soludo is looking to raise at least $1bn in equity to establish the AFC, a target that is being underwritten by the CBN. Already Nigerian banks have committed investment of more than $700m when the private placement was launched last month in Nigeria.


Development funding


The AFC is being billed as a private sector-owned and led regional investment bank. The business rationale for the proposed institution is the need to bridge the massive gap in funding required for the development of key economic sectors, in the process creating significant returns to investors. Its mission statement is “to be the leading international securities firm and investment bank in Africa with its leadership position defined by international investment grade rating, track record of profitability and delivery of positive returns to shareholders.”

It is envisaged the AFC will be owned by commercial banks in Africa, other institutional investors and African central banks, with a minimum of 51% of ownership held by the private sector. Within five years, the institution will be listed on one or more international stock exchange, including various regional exchanges within Africa.

Funding will be raised by means of international issuance and access to various credit lines. Significantly, legislation has been drafted to allow the CBN to make available up to 5% of the country’s external reserves – which presently equates to about $2.2bn – for lending through the AFC.

According to Mr Soludo, the AFC “will be viewed [much like] international organisations such as the International Finance Corporation, African Development Bank and South Africa’s Industrial Development Corporation”. He notes too that the institution will obtain diplomatic privileges and legal immunities such as those enjoyed by multilateral financial institutions such as the World Bank, avoiding what he describes as “tedious market entry formalities and regulatory requirements” such as application for a banking licence and listing requirements. Furthermore, the AFC will be tax-exempt at the corporate level.

It is a bold initiative, but it has raised eyebrows. In addition to launching the private offer without a management team or even a named CEO, Mr Soludo is promising a 21% return on equity by the AFC’s fifth year, a net interest margin of 48% and a profit margin of 41% – impressive performance even by international standards.

Notwithstanding obvious question marks about according a private sector-owned institution anti-competitive advantages – tax exemption, legal immunities and so forth – the AFC looks suspiciously less like a regional African investment bank and very much like a Nigerian institution, headquartered in Nigeria, underwritten by the CBN, majority-owned by Nigerian banks and probably listed on the Nigerian Stock Exchange.

Indeed, during the London road show, Mr Soludo was more inclined to talk about the exciting economic prospects in Nigeria than the rest of Africa.



Mr Soludo contends that the financing gap runs into the tens of billions of dollars, which is a clear signal that economic development needs are going unmet. Africa’s indigenous private sector investment banks mostly lack the size and, in the case of the large South African banks, the geographic coverage to effectively service the market. Left alone to market forces, it is doubtful strong, pan-African institutions would have emerged. Considering its size and economic significance (and potential), Nigeria in particular is conspicuous for its lack of muscular domestic investment banks with the necessary resources; the AFC is the consolidation of such resources under one roof.

In some ways, Mr Soludo’s widely hailed restructuring of Nigeria’s banking sector was a similarly crude intervention. However, it has proved undoubtedly successful. The 25 banks trimmed from 89 are larger and stronger and are already showing signs of playing a far more meaningful intermediary role in economic development.

“We have 25 strong and reliable banks, without one single unsound or questionable bank. It is the soundest the sector has ever been,” says Mr Soludo. “On a combined basis, these 25 banks are now the size of the first and second largest banks in South Africa. In contrast, the combined size of the 89 banks in 2003 was equivalent to the fourth largest bank in South Africa. Twenty of the 25 Nigerian banks are among the top 100 banks in Africa; 17 are in the top 40 and four are in the top 10. Whereas in 2003 Nigeria did not have a single bank among the top 1000 world banks, we now have 17.

“Growth in assets, deposits, credit and profitability since 2004 has been astounding. Performance on capital adequacy and liquidity ratios has been good and the size of non-performing loan ratios has declined significantly,” he says.

According to CBN figures, the asset base of the banking system increased 104% from N3209bn ($25bn) in June 2004 to N6555bn at end-September 2006. Capital and reserves were up 192% over the same time period to N957bn, compared with N327bn, and the industry capital adequacy ratio stood at 21.6%. Importantly, the ratio of non-performing loans was down to 9.5%, compared with 19.8% in June 2004.


Inflation busting


While Mr Soludo has gained many fans for his no-nonsense approach to reform, he is now under increasing scrutiny to see whether he can keep the Nigerian economy on an even keel. Aided by more prudent management of public expenditure, in particular cutting spending of windfall oil revenue, Nigerian inflation has slowed from high double digits to about 8%. Many argue this was the easy bit; keeping the brakes on inflation in a fast-growing economy – without jeopardising growth – will be tougher.

To this end, Mr Soludo promises “aggressive liquidity management” to counter this year’s expansionary budget, in which spending is up 21% on last year. The central bank’s monetary policy committee is likely to meet before the April elections, but Mr Soludo would not be drawn on rate movements, saying only that the bank was vigilant in countering increases in cash floating around in the economy.

His job is every bit as much about managing inflationary expectations. He is quick to point out that a potential injection of an additional $4bn in oil savings cash into the economy would be non-inflationary as they would merely fill the gap created by revenue shortfalls from oil production dropping under the 2.5 million barrels-per-day level forecast in the budget.


Investor concern


Foreign investors had applauded the 2007 budget for its prudence but now worry that a large disbursement from the excess crude oil account indicates that government is prepared to open the spending spigot ahead of elections. The excess crude oil account is savings from oil revenues above the budgeted price of $40 a barrel.

“It is not going to stoke inflation any higher than the budgeted framework,” Mr Soludo reiterates, adding: “All I’m saying is that [present] spending is only taking it up to that level. So it is not having any greater impact than the budget itself would have had.”

Asked if he thinks the government will overspend ahead of the election, Soludo replies: “No, I don’t think the government will go beyond that limit. So what is being proposed is still consistent within that particular framework, within that ceiling. So it is nothing above that. No new money.”

That said, whatever Mr Soludo’s worries ahead of elections, they may prove modest compared with difficulties managing the boom that would follow peaceful elections. If Nigeria’s reform plan remains intact, it is likely there will be a surge in investment which will need to be managed.
=========

Summary exercise caution by spreading your investments in the Banks. But not by abstaining. Also exercise caution by understanding what the banks invetsment data is like. Price to Book, Price Earnings etc.


ReIn line with comments of about Lagos Mega City Project

Folks,

I read with interest some of the postings on this thread and could not resist the urge to contribute to this discussions.

First, I want to state that I'm happy with current developments in the banking sector in Nigeria; an industry experiencing a period of unprecedented growth. This is indeed very good news for the development of the country. With the kinds of funds being mobilised by the sector, it will only be a matter of time before the ripple effect will be felt across the entire economy. Don't you all dream of a time when we all can easily obtain business, consumer and mortgage loans at attractive interest rates like what obtains in the developed world. If Nigerian banks aspire to attain the size of major financial institutions worldwide, how could they do so if they don't increase their asset base? If willing investors have the money to pour in to fund the growth, Jim Ovia, Tony Elumelu, or any other CEO should take advantage of it. I certainly would if I was one of them.

On the issue of raising debt, that is also a good strategy. Very few industries operate solely on equity. It is called leverage or gearing. Raising equity via the capital market can be expensive and dilutes existing shareholder's return. An alternative strategy is to augment with debt although it has some inherent risks. Before any one cries foul, all major financial institutions in the world hold a significant portfolio of debt. These institutions issue bonds and other financial securities to raise working capital. If you have been following the mortgage crises in the US lately, it will boggle your mind just how much debt was raised by financial institutions to fund the mortgage market in the last few years. Yes! I support Nigerian banks raising debt.

Back to the principal issue of threading with care when making the decision to partake in the 'never ending' stream of PO's from banks and other firms. I do agree that people need to do or obtain an in-depth analysis, understand the risks and opportunities before jumping on the bandwagon. On the flip side, investing in any capital market is not an exact science. No one person can claim to know it all. My strategy has been to first articulate my personal position and seek the opinion of a few trusted friends. This has so far worked for me and I have been satisfied with my returns so far. Of course the posting in Nairaland has been a goldmine. I give kudos to passionate contributors like Wanaj0, Easimoni (sounds like Easy-money), Pumping777, Roughcut, No-shaking and Yodiyokun. God bless you all and all the other folks like me who log on daily to Nairaland.

Regarding the issue of market asymmetry, the Nigerian Stock Market is relatively young and will eventually become more efficient with time. For me it is risk I know exist but the returns are simply too good to pass by.

In summary, yes invest with caution but the current development in the banking sector is good for the long-term benefit of the economy.  

One needs to be careful in investing and particularly read the prospectus.

Look out for dramatic changes between the last published reports and the accountants report for the prospectus. these dramatic changes always point to window dressing. The problem with window dressing is that the truth comes up after a long time. but may not be long enough to clear your cert and sell.

Where there are profits, see if the profit is in the ordinary course of business eg Banks making profits from banking business. this points to sustainability.

Also look out for a relationship between the tax growth and the profit growth. If you have the full details of the accounts look out for industry averages - relationship/ratios between figures. this tells the standard industry practices.

You indeed need to look out on these 2 specific areas
Tech Analysis and market analysis (perception of the coy - "Hype")
Hype carries share to higher values as they represent the confidence the market has on the shares. Technical evaluations keep you away for dead companies.

Michael

Thanks but are you talking about all banks or some banks, what are the names of the banks

capital is the nam of the game. Like one poster said, to finance serious projcts like 4th Mainland bridge, oil & gas, telecommunications, infrastructure and even serious housing projects, you need long temr capital that offers can offer. Capital is the name of the game. Nigierians like this 'ownership' thing and are not readilty willing to sellout else we would have seen willing mergers and acqusitions so that Nigerian banks can compare with their foreign counterparts at the current disheartening exchange rate.

Note that as the Exchange Rate improves, the worth of most of these local banks will improve as well. More importantly, to avoid being sidelined, you need to keep on sourcing for mor funds either through debt or equity and keep plawing back profit into reserves all in a bid to remain relevant and active.

Do not forget that there will always be very huge demands for funds usage by the economy such that will guaranty good return on investments. So, banks stocks are good buys at least in the medium term as the economy is just kick-starting.

So, there is so much room still.

Cheers

Nigerians too sabi book,

Just drop one topic & everybody go get bountiful opinion.

Just like football,we are all very good at analysis,

Hi all. Whilst beating tthis thread to tatters, Wema bank has grown about 15% in the last 3 trading days.

Abeg let's chill on the spit work and try to make some money.

We can debate the merits or demerits of the flood of offers or the integrity of bank books, but the mart moves on perception of value and not the reality of it.

I advice we get on a good stock , ride it for all it is worth and dismount before it croaks beneath us. I leave all the debate to the academics. And we all know they do not make much money.

tj4ever:

Hi all. Whilst beating tthis thread to tatters, Wema bank has grown about 15% in the last 3 trading days.

Abeg let's chill on the spit work and try to make some money.

We can debate the merits or demerits of the flood of offers or the integrity of bank books, but the mart moves on perception of value and not the reality of it.

I advice we get on a good stock , ride it for all it is worth and dismount before it croaks beneath us. I leave all the debate to the academics. And we all know they do not make much money.

The same academics you are yabbing bought wema bank when it was N3-4 and are now selling.

What advise are we given here? What advise are we giving as well? Trading of shares isn't for the faint at heart. Be prepared to lose - and lose big, even before you invest your first coin, for in so doing, you psyche yourself up for the inevitable. The truth is, while analysis helps in many more ways than we can enumerate here, you can't always win. The money you make was gleaned from someone else's pockets. The sensibility in all this is to know when to back out of the game, regardless of whether you're on top of the winning curve or the bottom of the losing curve.

Besides, regardless of our errant scribblingon these pages, the high-rollers will still do what they want. But thanks for the guidelines; may somewhat reduce the casualty rate.

Cheers!

@saipro
i cant help but laugh at your 100% ignorance of the stock market
(THE MONEY YOU MAKE WAS GLEANED FROM SOMEONE ELSE'S POCKET) is that so?
teach me more,mr teacher

@hbrednic

Capital isn't always generated from industry. If the banks were running short, as some claim, then the bulk of the capital comes from shareholders. Should the bank wind-up, it's the share-holders' loss. That's on the long-term.

On the short-term, trading is about who's gaining and who's losing. Where does your profit on the trading floor come from? Surplus funds on the floor?

Laugh some more . . . . but be careful of who's ignorance becomes apparent.

@teacher saipro
your tiny argument is just a sick-ence to your show of ignorance.
i will keep on laughing at you,untill you retract, bite and finally swallow your word.
(THE MONEY YOU MADE WAS GLEANED SOMEONE'S POCKET).so thats how stock market works in ur own understanding?
why not a litlle research b/4 dishing out your negative advice. mr teacher.

I do think that the bank ipo's are flawed and shame on the CBN and the regulatory body SEC{securities and exchange commission} The figures are also flawed.Take Access bank for example there firgures are so flawed that there is a questionable 1000% increase in its gross earnings. Zenith bank AkA JIM OVIA's private empire where share prices are over estimated and annual reports flawed in other to go to the market and hope that the shares are over subscribed so that they can make quick money.Jim ovia keeps developing properties in Lagos and abuja and expanding his private empire with our money.
I recently discoursed this issue with an executive director of a bank (name and bank withheld) and he comferemed to me that the figured are wrong and its a matter of time before heads would start to roll.He also found it difficult to understand why the CBN would let that happen. With the CBN governor treating to jail local jurnalist if they report on any issue they are not sopposed to your guess is as good as mine. Nigerians please be WATCH OUT!!!

I think the starter of this topic knows what she is talking about.

Also , people are getting wise to the tricks of these banks. Read this article here :

http://businessdayonline.com/National/1063.html

Hi Sweet T,

I totally disagree with you. I think you should go back and make a good research before you come up with such information. Okay Again i warned you should stop giving people high blood pressure in this Nairaland.

Frankly, i would like to introduce Diamond Cash Club to you. It is very good online networking business where you register under someone with sum of N35,000 and within two months will be earning 14,000 USD and it is unlimited earning. I hope it is help you because it is helping a lot of people including me. Call me for more information. 08033924627. ANAYO or VICTOR. You may visit their website www.diamondcashclub.com Thanks.

@ramonmulti

Is there anythinng wrong with you? Is it so hard for someone to behave well in a chat room/public forum?

You come in warning Sweet T to stop spreading anxiety but do you profer any relevant information? No.

You just go ahead to hijack the topic and post about your stupid club.

If the companies in Nigeria cook their books who is gonna stop them? Nobody!!!! And that is why investing in Nigeria is riskier than buying a 'no-testing' television.