Bearish sentiments swell around GCB stocks…since takeover of UT & Capital banks

Exactly a month ago after the GCB Bank takeover of UT and Capital banks, all but one GCB stakeholder seems not to accept the new normal.

While the industry’s regulator approved of the takeover and the board, management, staff and customers, are all coming to terms with the situation, market movements are signalling that investors are bearish on the deal which seeks to make GCB the biggest bank in the country.

Since the takeover announcement on 14th August, the bank’s shares, which trades on the local bourse under the moniker ‘GCB’ and was on a bullish run all year, took a turn south and has now dropped by 12.5percent from GH¢5.14 to GH¢4.50, as of yesterday.

What this means is that, if an investor bought, for example, GH¢10,000 worth of GCB Bank shares at GH¢5.14 on the day of the takeover, it is now valued or can be sold at GH¢8,750, indicating a loss of GH¢1,250.

Despite the rallying of the value of financial stocks all year to bring about positive growth on the stock market, shocks still remain alive and the movement in GCB Bank’s share price goes to show that it will take some time for the market to recover fully from the devastating effects of the economic downturn experienced over the past three years.

Due to subdued performances by banks as a result of the general economic meltdown, the market recorded negative returns over the past two years –11.77percent and 15.33percent in 2015 and 2016 respectively– but 2017 has seen a return of positive growth and so far, the Composite Index has posted a return of 40percent backed by a strong rally on financial stocks.

The rally of financial stocks, partly led by GCB, saw the bank’s shares commence trading at GH¢3.60 in January, 2017 and peaked at GH¢5.24 in the last week of May, 2017, representing a return of 46percent in the first half of the year.

This performance was the third highest among financial stocks after Standard Chartered Bank (SCB) and Ecobank Transnational Incorporated (ETI), that have seen over 100percent and 50percent returns respectively.

Since its peak in May, the share price has been fluctuating between GH¢5.23 and GH¢5.15 until it started to consistently trend downwards a week after the takeover, recording its biggest loss of 11.8percent just last week, 31st August to 8th September.

Even though the current price is still a positive return of 25percent year-to-date performance (January to September), analysts are of the view that, it could have been better had it not been the takeover of two ‘toxic’ banks.

Chief Executive Officer of Nordea Capital, Dr. Edem Bart Williams, explained that investors are right to be sceptical in the short term due to the impairments on the books of those banks [UT and Capital].

“They have taken on not just one but two toxic banks. I will rather protect the little gains I have made than wait,” he said, adding that what investors are doing is checking out gradually. “They are taking precautions in the short term.”

Dr. Williams noted that this trend is likely to continue until the receiver (PwC) and GCB Bank come out to stipulate what is in the books and assure investors, which will then bring back confidence.

“For now everyone is being cautious. They [PwC and GCB Bank] have about five months now to conclude everything. It is in their interest to be giving out information to investors and assuring the market that they are turning things around,” he added.