Union Bank Plans N50 billion Rights offer

In corporate news, UBN has announced plans to raise as much as N50 billion via a rights issue with permission being sort in an AGM scheduled for December 7, 2016. UBN like many tier-2 banks is struggling with diminishing capital adequacy. The rights issue, against a backdrop of a significantly watered down equity price and weak investor interest should weigh heavily on UBN’s valuation going forward.

Investors appear reticent to invest in stocks with CBN data showing foreign portfolio investment into the equity market in Q3 was just 15% ($201 million) of the total capital inflow which amounted to $1.82 billion—equity investment historically dominated inflows. Given our expectation of a weak Q4 earnings season, we see the market loss moving towards the 12% level by year-end.