First Bank Shares Down Almost 30% On Regulators’ Peep Into Otudeko’s Invasion
The share price of First Bank Nigeria (FBN) Holdings crashed by 28.2 percent on Friday, July 14 after Obafemi Otudeko’s massive acquisition of the lender’s equities attracted the searchlight of the Securities and Exchange Commission (SEC).
At the close of trading on Friday, the stock lost almost a third of its value, dropping from a high of N22.30 per share on Tuesday, July 11 to N15.80 per unit on Friday, July 14, 2023.
During the day, the stock touched a high of N23.50 per share.
Otudeko, who is the founder and chairman of Honeywell Flour Mill, was the chairman of FBN until 2019 when the Central Bank of Nigeria (CBN) removed him from the board of the bank in controversial circumstances.
But last week, he launched a spectacular come-back to the bank after mopping up 4,770,269,843 units of FBN Holdings’ shares using an affiliate of Honeywell Group, Barbican Capital Limited.
Banking sources say Otudeko was emboldened by the ouster of the Governor of Nigeria’s Central Bank, Godwin Emefiele who is currently on suspension and under investigation.
The purchase brought the stake held by the company in the premier bank to about 15 percent, making it the majority shareholder of the company’s issued share capital of 35,895,292,791. The record trades that moved from 26 nominees and trustee accounts to Barbican Capital Limited and valued at N87.8 billion have generated controversies among the capital market community.
A few days after the purchase, Ecobank for instance, wrote a letter to FBN Holdings asking the bank to reject the Otudeko-led Honeywell’s bid to become the company’s largest shareholder.
Ecobank said that Honeywell is indebted to it to the tune of N13.5 billion — a claim the company has denied despite a Supreme Court judgment in favour of Ecobank in the contested corporate debt.
The SEC says it is investigating Otudeko’s massive acquisition of the 4.77 billion FBN shares, a move that bids fair to trigger further price reversals after some equities investors offloaded the Tier-1 lender’s shares at a discount in the last three trading sessions.
What’s in FBNH?
FBNH’s foreign exchange (FX) earnings and dividends per share are expected to rise in the full year (FY) 2023 after the CBN floated the Naira on June 14, 2023.
According to Proshare Nigeria, market intelligence indicated that FBNH has traded over N200 billion worth of FX since the policy implementation, indicating a larger FX income for 2023. The rise in income would reverse the -47.35 percent drop recorded in Q1 2023.
“The positive adjustment should increase gross earnings, thereby potentially improving dividend payout,” Proshare analysts stated in an emailed report at the weekend.
Holdco’s dividend payout ratio fell from 19 percent in 2019 to 13 percent in 2022. But analysts see the group’s gross earnings rising to between N925.90 billion and N1 trillion, pushing earnings per share and dividend per share to N4.44k (up from N3.74 in 2022) and N0.65k (up from 50kobo), respectively, in FY 2023.
FX shortage had adversely affected the foreign exchange positions of most banks including FBN Holdings. Financial Holdco’s foreign exchange income stumbled from N32.92 billion in 2018 to N1.46 billion in FY 2020. Lower FX transactions due to stringent FX application requirements had encouraged patronage of the parallel market, thereby hurting banks’ FX income.
FBNH’s foreign exchange income has recently improved but remains below its 2018 income, as FX income for 2022 settled at N22.39 billion.
Analysts believe that exchange rate unification should improve the size and number of official FX transactions for banks as the CBN recently revised the daily transaction limit to US$10,000.
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