Zenith Bank in N2.3b private shares deal

Zenith Bank in N2.3b private shares deal

A total of 210 million ordinary shares of 50 kobo each of Zenith Bank International Plc valued at N2.3 billion were sold at discount at the weekend in nine pre-arranged transactions that were merely formalised through the Nigerian Stock Exchange (NSE).

A confidential report on the transactions indicated nine deals were struck at the weekend to transfer 210 million shares of the bank.

The deals, according to the report, were done through the off-market, negotiated cross deals window of the Exchange and as such were not subjected to the dynamics of price discovery for the particular period. Off-market trade implied that the deals were sealed outside the floor of the NSE.

The negotiated cross deal platform of the Exchange is a special-purpose trading platform that is meant for voluminous transaction. By the cross deal, it implies that the buyer and the seller had been prearranged and the transfer at the stock market was a mere perfection of the agreement between the two. The negotiated cross deal allows the parties to the deal to close the deal at reduced cost.

In the first tranche of four deals, 120 million shares were crossed at N11. The deals were negotiated cross deal between, CSL Stockbrokers Limited and Stanbic IBTC Stockbrokers Ltd, which sold to Fortress Capital Ltd.

In the second tranche of five deals, a total of 90 million shares were crossed at N11 as negotiated cross deals between Stanbic IBTC Stockbrokers Ltd, CSL Stockbrokers Limited and Fortress Capital Ltd.

The negotiated cross deal price of N11 represents a discount of 14.3 per cent to Zenith Bank’s current market price of N12.83 per share at the NSE.

Zenith Bank, NSE’s second most capitalised bank and the fifth most capitalised quoted company, has been under selling pressure as investors reappraise banking stocks. Zenith Bank’s share price has dropped by 8.68 per cent so far this year.

Exotix Partners LLP, a global finance and investment firm, has said 2016 could be challenging for Nigerian banks citing further downside risks materialising with the continued fall in oil prices and foreign exchange uncertainties.

The report titled “Nigerian Financials: Oil prices and FX constraints pressure metrics”, was signed off by Nashwa Saleh, a chartered financial analyst and director, head of financials credit research, Exotix Partners LLP.

“We expect both banks’ asset quality metrics and foreign exchange liquidity to be negatively impacted,” Exotix stated.

According to the report, the latest analysts’ report is an update on the credit, market, operational and system risks for the Nigerian banking system using a traffic light signals model calibrated to nine-month results for this year.

The report noted that credit risk is a slow-bleed process and market risk is a fast-bleed process, with the former impacted more by structural macro issues and stocks, and the latter more affected by flows and current exposures. The model allocates a score of one for each category for each bank if it is above the system average and a score of 0 if it is below the system average, for a total risk score of 10. The risk scores are then sorted with any score above the median 5 getting a red signal, below a green signal and at the median a yellow signal.

The report however noted that while both banks’ asset quality metrics and foreign exchange liquidity could be negatively impacted, the sector’s current financial soundness indicators and comfortable capital buffers provide some headroom.

The report pointed out that credit growth in third-quarter 2015 across the sector on the back of changes in minimum reserve requirements was a marginal decline of three per cent, with nearly all banks seeing their loan book shrinking.