- South African Investor Buys More Zenith, Access Shares
Allan Gray Ltd., the largest manager of non-government investment funds in Africa, has increased its stake in Nigerian Zenith and Access banks.
The South African investor, based in Cape Town, is betting on Nigeria’s banking industry despite poor performances by the oil companies it depends on and widespread calls for the naira to be further devalued.
Allan Gray Chief Investment Officer Andrew Lapping disclosed the investment move in a Feb. 10 interview in Cape Town. He didn’t say how big the holdings are or how many shares his company is buying.
“We see a lot of value in Nigerian banks,” Lapping said. “Most people think they’re all going to zero because of the bad debts. We think they will survive” because high interest rates make the banks profitable and they have less debt to equity compared with European lenders, he said.
Access Bank Chief Executive Officer Herbert Wigwe said last month that the bank’s non-performing loans are expected to climb to “slightly below” 3 percent of total loans by the end of 2017. That compares with 2.1 percent for the nine months through September.
The banking industry is under stress in Nigeria, where the economy was in a recession during 2016. Non-performing loans escalated to almost three times the regulatory maximum and foreign investors are calling for authorities to boost flexible trading of the naira before putting more money into the country. An oil price at half its 2014 levels, combined with sabotage and attacks on oil installations that have cut output, has limited dollar supplies in the country, which vies with Angola as Africa’s largest crude-oil producer.
The bad-debt ratio at Nigerian banks rose to 13.4 percent last year. The naira was devalued in June and traded at 315.50 to the dollar by 6:53 a.m. in Lagos on Wednesday, while the unofficial, black-market rate was 507 naira to the dollar. The official exchange rate should fall to 370 by the end of the year, Craig Metherell, an analyst at Avior Capital Markets Ltd. in Cape Town, said in a Feb. 10 note to investors. Investors are frustrated by central-bank policies, he said.
“Dollar illiquidity and the inability to predict the central bank’s decisions remains a constant deterrent to dollar-based investors,” Metherell said. “While we argue that valuations look cheap, we find it difficult to justify investing new money given the current status quo.”
Allan Gray isn’t the only investor that’s interested in local lenders.
Laurie Dippenaar, chairman of Johannesburg-based FirstRand Ltd., Africa’s largest bank by market value, said last month that it’s looking to buy a mid-sized bank.
Diamond Bank Plc, Sterling Bank Plc and Wema Bank Plc were among mid-sized Nigerian lenders that plummeted more than 40 percent last year as the domestic economy performed the worst since the 1980s.
“Everyone thinks the naira is going to weaken, but I’m not so sure,” Lapping said. “The bad-debt problem can cure itself over time.”
Nigerian banks are also attractive because their small size — in an economy that vies with South Africa as the continent’s largest — adds to their growth potential, while lending as a proportion of equity remains low at 3.5 times, Lapping said. Still, the industry’s exposure to oil remains a concern, he said.
Guaranty Trust Bank Plc, Nigeria’s biggest bank by value, has a market capitalization of 715 billion naira ($2.3 billion), Access Bank is valued at about 194 billion naira and Zenith at about 475 billion naira.
FirstRand, Africa’s largest bank, has a market value of 293 billion rand ($22 billion).
The Nigerian Stock Exchange Banking 10 Index has climbed 0.7 percent this year as gains by Access Bank, Zenith, United Bank for Africa Plc and Fidelity Bank Plc helped compensate for losses in the other six members of the gauge.
“Maybe we’ve dug ourselves into a hole” by investing in Nigerian banks, Lapping said. “Even if it’s 50-50, going bust or going up, the upside is so much that it’s worth the risk.”
FBNQuest Mutual Funds returns 104%
FBNQuest Asset Management, a subsidiary of FBN Holdings, has held yearly general meetings for five mutual funds managed by the firm.
The funds are the FBN Balanced Fund, FBN Smart Beta Equity Fund, FBN Eurobond Fund, FBN Bond Fund and the FBN Money Market Fund.
The Fund Manager continues to deliver commendable results, as demonstrated by strong performance across all its funds.
The FBN Bond Fund was the best performing of the mutual funds, returning 104.20 per cent over five-year while its US Dollar fund, the FBN Eurobond, returned 48.43 per cent in US dollars over the same period.
The Managing Director of FBNQuest Asset Management, Ike Onyia, said: “Our strong performance track record is premised on the research capabilities, insights and experience of our portfolio management and research teams. Our mutual funds serve as useful investment options useful in formulating unique and value-adding investment strategies for various client segments. This is because our range of mutual funds cut across various asset classes including equities, bonds and money markets.”
“Our funds remain easily accessible, as our goal is to continue to drive financial inclusion and democratise wealth creation, by supporting the financiainclusion and democratise wealth creation, by supporting the financial security aspiration of investors” he added.
Increasingly, financial markets are becoming complex to navigate and as a result, it will not be out of place for investors to actively seek the inclusion of mutual funds in their investment portfolio, which will serve as the structured gateway to such markets. Seeking the help of experienced financial planners to assist you in establishing your risk tolerance levels and advise on suitable options is highly recommended.
SEC Warns Against Proliferation of Unregistered Investment Platforms
The Securities and Exchange Commission (SEC) has warned the investing public to be wary of the proliferation of unregistered online investment and trading platforms facilitating access to trading in securities listed in foreign markets.
SEC’s warning was conveyed via a circular issued in Abuja, Thursday to capital market operators.
It advised the investing public to seek clarification as may be required via its established channels of communication on investment products.
The circular read: “The attention of the SEC has been drawn to the existence of several providers of online investment and trading platforms which purportedly facilitate direct access of the investing public in the Federal Republic of Nigeria to securities of foreign companies listed on securities exchanges registered in other jurisdictions.
“These platforms also claim to be operating in partnership with capital market operators (CMOs) registered with the Commission.”
The Commission categorically stated that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, only foreign securities listed on any exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public.
Accordingly, the SEC notified CMOs who work in concert with the referenced online platforms of the Commission’s position and advised them to desist henceforth.
Public to seek clarification as may be required via its established channels of communication on investment products advertised through conventional or online mediums.
SoftBank Reaps $33 Billion Coupang Windfall
SoftBank Group Corp on Thursday racked up a roughly $33 billion gain on paper through the public market debut of South Korea’s largest e-commerce company, Coupang Inc, the latest sign of a dramatic turnaround for its $100 billion Vision Fund.
Shares of Coupang opened 81% above their offer price on Thursday, after the company raised $4.6 billion in the U.S. stock market’s biggest initial public offering this year.
SoftBank paid around $3 billion for a 37% stake in the company, according to sources familiar with earlier fund-raising, giving it a roughly $33 billion headline profit if prices hold.
Coupang’s hugely successful stock market launch is welcome news for SoftBank, which is grappling with the collapse of billions of dollars worth of funds linked to Britain’s Greensill Capital, a supply chain finance start-up.
Vision Fund is Greensill’s biggest backer.
The Japanese conglomerate last month reported third-quarter net profit ballooned more than 20 times thanks to a recovery at the Vision Fund, a huge venture capital operation famous for investing early in Uber and other tech industry startup successes.
Only a year ago, SoftBank had been smarting from the flopped IPO and collapse in value of office sharing firm WeWork, raising questions over whether Chief Executive Officer Masayoshi Son had lost his midas touch and threatening plans to establish a successor to Vision.
The COVID-19 pandemic has also forced Son to sell assets but a second deal reported by Reuters on Thursday bodes well for VF II, a second, smaller fund.
The $225 million late-stage funding round for healthcare startup Forward Health was its first major investment this year, following a pickup in activity and the group’s fortunes in the second half of 2020.
The Vision Fund also made $11 billion on a blockbuster market launch of DoorDash Inc in December, which valued the food delivery company at more than $70 billion.
It also made gains on home seller Opendoor Technologies Inc’s initial offering in December.
The fund still holds large stakes in China’s biggest ride-hailing firm Didi, as well as Uber’s Southeast Asian rival Grab.
SoftBank is also trying to ride the mania for special purpose acquisition companies, launching a handful of blank-check firms this year, although none of them have found investment targets yet.
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