Dear Africa Interested Professionals:
I have put together a bunch of random thoughts to close out the first quarter of 2017. Will be back to the rest of the continent as from Q2 2017 and put Nigeria to bed for awhile.
Stanbic IBTC Accounting Scandal: Do you know that everyone directly linked to the falsification of results is now out of the Stanbic IBTC picture directly?
1. Atedo Peterside; Resigned as Chairman of the board of Stanbic IBTC.
2. Sola david-Borha: Resigned as CEO of Stanbic IBTC Holdings. Now works for Standard Bank Group out of Johannesburg.
3. Arthur Oginga: Resigned as CFO and has left the Standard Bank group entirely. He now works for a bank in Botswana.
4. Jim Obazee; The Executive Secretary of the Financial reporting Council that leveled the charges against Stanbic IBTC. He has been relieved of his duties. The Corporate Governance Code for businesses he was about to implement nationwide is now in limbo and may never be heard of again.
5. Ayodele Othihiwa: Is no longer the engagement partner for the account of Stanbic IBTC for KPMG.
I guess the majority shareholder: Standard bank of South Africa has decided to clean house and get all "actors' out of the scandalous close-up picture.
I will state that there was TRUTH in the accusations. I am not speaking for Jim Obazee's intentions. The bank did have a case to answer. Despite the denials by all accused scandal participants, KMPG Nigeria did make some amendments in the 2015 annual report that also includes the 2014 statements. The bank's concern now is how to get its share price back to N25.00 so that another rights issue can be embarked upon.
UBA: I have an article (it is the featured post on this blog as at 3/28/17) and UBA was used as my example. I said the bank's share price has not moved in tandem with its fundamentals because the bank's balance sheet was overly stretched and needed to be loosened. As this takes place, the bank's share price will begin to be freed from its shackles. UBA's (A - L)/TC is now at about 2.5X and was at 3.1X barely a year ago. The figure needs to drop below 1.95X and is clearly moving in the right direction. A similar situation is plaguing Kenya Commercial Bank. Financial leverage has dropped from 9.1X to about 8.3X. UBA has risen about 40% over the past one year as a consequence.
Secondly, UBA has been enamored with rapid expansion over the years. I wrote another article a year ago, discussing UBA and Equity Bank (Search in the archives) and said that UBA's desire to expand again is not in the bank or its shareholders' best interest. The bank needed to consolidate on what it has by improving the performance of its existing locations in 18 African countries and not move into more countries. UBA has heeded (not publicly as far as I know) has held off on this. The increase in pre-tax income across its 18 locations (N15.3B) from 2015 - 2016, exceeds the increase in pre-tax income from UBA Nigeria - of approximately N7.7B over the same period. This is a doubling.
I discussed UBA in May of 2015 with a Scandinavian fund manager on the phone and reached out to him recently to remind him of what we discussed, what I said and what is currently in play as it relates to UBA and if he still holds a position. In summary, as long as UBA continues to reduce its assets on its balance sheet and does not expand into new African countries while maintaining positive earnings accretion, UBA will return to a double digit banking stock before the end of March 2018 in my opinion.
Access Bank: I have stood by the TRUTH and have asked investors to exit their positions in Access Bank. While what I am seeing, may not be clear to others yet, I stand by my opinion that the bank's FY 2016 performance is NOT a true reflection of its present reality and this will not be the first time. Certain brokers have been trying hard to defend the stock's share price as investors exit. Many banks have tried this in 2006, 2007 and part of 2008. It is not sustainable and burns through cash pretty fast directly and indirectly. Yesterday, was telling as the bank's share price opened lower, went lower during trading, and still closed the day in the GREEN. No other stock among the over 100 traded, had the same experience. No other stock opened lower, went even lower during trading AND ended up gaining (positive price performance) for the day by market close except Access Bank. The same late push-back happened today, but, fell 3 kobo short to make it into positive territory. The stock was down in excess of 2% just ninety minutes before closing. The TRUTH never loses... Stay tuned.
I am not 100% sure, but it appears Zenith Bank has "pulled the plug" on their equity public offer for at least the near-term. If true, GREAT NEWS! Management is listening and adjusting to the new dynamics in play. You can go and read my views on Zenith (a very different perspective) in two other articles on this board over the past one month. The market is also not giving the stock that positive bump everybody expected given its eye-popping dividend yield.
We are in different times now, Management and Investors, I hope you are listening and acting accordingly?
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