CBN’s sanction on 12 banks takes toll on equities market

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THE sanction imposed by the Central Bank of Nigeria, CBN, on 12 banks last week heightened the bearish sentiment in the equities market, leading to 2.5 percent decline during the week.

Also, investors’ wealth dropped by N347 billion as the sanction weighed down on banking stocks.

The CBN had sanctioned a total of 12 banks that missed its Loan-Deposit Ratio, LDR, target of 60 percent, as at September 30, 2019, fining them a total of N499.2 billion last week.

The action, consequently, led to a decline in the major equities gauge – the All Share Index, ASI, by 2.5 percent to 26,987.45 from 27,698.69 points the previous week, while the market capitalisation of listed equities fell by N347 billion or 2.5 percent to close at N13.137 trillion from N13.484 trillion.

Meanwhile, analysts at Cordros Capital, a Lagos-based investment banking firm, said the trend witnessed through the year would likely persist throughout the last quarter of the year, but said that investors would record pockets of gains over the final months of the year as fund and portfolio managers realign portfolios prior to the start of 2020.

“We note that valuations remain attractive driven by price deterioration throughout the year. Hence, we advise that long-term investors consider appropriately timed investments,” they said.

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