Nigerian Banks’ Succession Plan, Prospects of Dividend Raise Hope

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Zenith Bank dividend may support market this week. The Nigerian stock market responded positively to succession plans announced at the United Bank for Africa (UBA) Plc and Zenith Bank Plc with a 3.7 percent rally in the banking industry that pushed the Nigerian Stock Exchange (NSE)'s All Share Index (ASI) 1.9 percent higher last week compared to the previous week.

Renaissance Capital attributed the new found enthusiasm in the capital market to the possibility of quoted companies, particularly those that have passed the audit test of the CBN, announcing scrip issues and dividend payments. UBA has said Phillip Oduoza, who has more than 22 years experience in the banking industry, will succeed Tony Elumelu as chief executive in August 2010.

Zenith Bank announced that Godwin Emefiele also a seasoned banker will succeed Jim Ovia, its current chief executive officer. The announcements follow the launch of the Central Bank of Nigeria (CBN)'s new policy on bank managing director tenure, which initially triggered some bearishness on the equity market.

Guaranty Trust Bank (GTB) is expected to announce a scrip issue and dividend for its 2009 financial year. This supported the stock, which advanced 7.8 percent on strong volumes last week (9 million units daily).

Renaissance Capital, however, said that the year-end audits by the CBN scheduled for the coming week may get investors jittery.

Other significant market developments last week include Oando Plc's rights offer of N21.1 billion which opened on January 25, AIICO Insurance Plc announcing strong nine months earnings growth of 63 percent, implying relatively low exposure to quoted equities during the period, and PZ Cussons reporting an 8.7 percent improvement in net earnings, to which the market did not react positively.

Renaissance Capital believes that with the arrival of a new month, and as some cash investments mature, local fund managers may have a tough decision to make - whether to roll-over cash with a maximum real yield of one percent, or increase their equity holdings."We believe they are more likely to opt for the latter. We note that year-to-date (YtD), the average yield on fixed deposit investments has plummeted to 12-13 percent, from a high of 18 percent in the fourth quarter of 2009.

This makes cash investments less attractive to investors; therefore we expect funds to increasingly flow in favour of equities in 2010", said Renaissance Capital.It, however, said execution over the next quarter could be slow as local fund managers seek the market momentum "we are now starting to witness. We think market expectations of a 2009 scrip issue and dividend from Zenith Bank could support the market this week".

Source: Banks' succession plan, prospects of dividend raise hope in capital market

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