Wednesday, 8 October 2008

WILL NIGERIAN BANKS SUFFER HUGE LOSSES?

There is fear in the land! This fear is built on the uncertainty about the banking stocks and their level of financial crisis. This crisis is currently bedeviling the American and European stock markets and financial institutions. Several banks have gotten into stormy waters, closing shop as they could no longer meet up with their legal obligations as the financial problems persist.

The Dow closed at 9446 points yesterday, and there is still no assurance that the 700 billion dollars bail out plan in the US will work. In the Middle East, their markets have started tumbling, oil is getting cheaper by the day and most economists are lowering their ealier projections for this year.

Coming back home, the new fear is that some of our banks are not as healthy as they claim, I have written about this earlier last month. But the persistent fall in the price of banking stocks have not helped matters. The stock prices may be falling in reaction to some insiders trying to sell off their shares, having known that the price is overvalued. Everyone may be running away from bank stocks till we get to know how much exposure they have to the margin facilities.

Lets look at the case of Oceanic bank plc, they published their fourth qtr result for the period ended Sept 2008, in the result, their most recent quarter result was much lower than its second and third quarter results. Is this trend going to repeat itself with the other banks or is this a one-off occurrence? Oceanic bank has also been praised for coming clean of the alleged bad loans, let us keep our fingers crossed.

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