CBN’s CRR adjustment takes toll on equities

GTB, Zenith, Stanbic emerge top losers
Prices of banking stocks tumbled at the close of trading yesterday, as the impact of the recent Cash Reserve Requirement (CRR) adjustment by the Central Bank of Nigeria (CBN) at its Monetary Policy Committee (MPC) meeting continued to hit hard on the sector.

The apex bank adjusted the CRR from 22.5 per cent last week to 27.8 per cent.

Apart from Guaranty Trust Bank (GTB), which traded flat, other tier one banks lost, bringing the sector’s index lower, while the market dipped by 0.26 per cent.

MPC at its first meeting this year on Friday, January 24, raised the CRR upwards by 500 basis points to 27.5 per cent – a move last witnessed in March 2016.

It retained all other policy parameters constant – the Monetary Policy Rate (MPR) at 13.5 per cent; asymmetric corridor around the MPR at +200bps/-500bps; liquidity ratio at 30 per cent.

It also maintained the demand for a minimum of 65 per cent on the loan-to-deposit ratio for the banks. The combination of these ratios, analysts say, will impact negatively on the operations of banks in the year.

At the end of transactions yesterday, 10 banks constituted the losers chart. These are Fidelity, Union, Unity, GTB, Jaiz Bank, Wema, Stanbic IBTC, United Bank of Africa (UBA) and Zenith.

Specifically, Fidelity lost 0.22 kobo to close at N2.11 per share, Union followed with a loss of 0.30 kobo to close at N5.90 kobo per share, Unity shed 0.03 kobo to close at N0.60 per share, GTB depreciated by 1.10 kobo to close at N31 per share.

Jaiz decreased by 0.02 kobo to close at N0.67 per share, Wema declined by 0.02 kobo to close at N0.70 per share, Stanbic IBTC loss 1.00 kobo to close at N41.50 per share while Zenith shed 0.30 kobo to close at N21.15 per share.

Reacting on the development, the Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion, said there was already fear of likely reversal in CBN’s Open Market Operation (OMO) restrictions.

However, he pointed out that CBN decision’s was a good step in the right direction because the action would reduce liquidity in the system, which would enable the apex bank to be in total control of funds.

According to him, the decision is not the cause of the downturn in the equities market, but the fear that the capital wave in the financial market may change in the midst of the unstable economic outlook for 2020.

“Prices of banking and consumer goods stocks wobbled with a negative impact on the Nigerian Stock Exchange (NSE)’s composite All-Share Index (ASI), as there is fear of likely reversal in CBN’s OMO restrictions.”