West African financial markets insight

Written by Mrs Kadi Fadika-Coulibaly, MBA, Managing Partner of Hudson & Cie on 11 December 2017

West African financial markets insight

The West African Financial Markets Region has existed for 19 years, and is comprised of eight (08) countries of the WAEMU zone. It is itself regulated by the Regional Council of Public Savings and Financial Markets (CREPMF). The Regional Stock Exchange (BRVM) and the Central Depository / Settlement Bank (DC/BR) are the two central bodies. Twenty-seven (27) Authorized Management Companies and Brokers (SGI) provide the link between investors, issuers and central market structures.

The BRVM has a market capitalization of CFA 6,442 billion and CFA 2,847 billion respectively for the equity market (43 listed companies) and bonds (42 bond lines).

Hudson & Cie is a Brokerage company (SGI), approved by CREPMF under the number 15/12/006/97.

We provide businesses, financial institutions, governments and high-end individuals in the WAEMU zone, in Africa and internationally with advisory and technical assistance. In addition, we offer fundraising services (bonds and private placements), mergers/ acquisitions, privatizations, restructuring, IPOs, mandated portfolio management and investment advisory services. This is in order to support the activity of the BRVM's primary market, which since 2016 is experiencing a revival of activity with 5 new transactions on the stock market for a raised amount of 122 billion CFA between 2016 and 2017. 

Hudson, which is the leading broker of the WAEMU zone among 27 with 30% of market share in brokerage, is the oldest independent Management and Intermediation Company of the UEMOA zone. The team has had the honour of handling the capital increase and the sale of NSIA's securities to the public. This independence and proven expertise for more than 20 years have convinced the shareholders of NSIA Bank to entrust Hudson & Cie with their IPO process.

After obtaining the CREPMF permit authorizing the public offering on June 20, 2017, the subscription was opened on July 3 at 8 am for an indicative period of ten (10) days. From the first hours, a significant demand was registered and the network of the bank agencies were taken by storm by the investors demand. An early closing on the same day at 15:30 was necessary to limit the oversubscription.

As a result, the total demand stood at 72 billion FCFA from 17,857 subscribers while the offer was 34 billion FCFA. The State of Côte d'Ivoire sold 841,500 shares out of its total 10% stake and the bank 3,170,000 shares (resulting from the capital increase intended to bring the capital to 23,170,000,000 CFA). The cession of the State’s shares was included in the privatization program of the Ivorian Government. 

Indeed, for the banking sector, the State of Côte d'Ivoire intended to comply with the recommendations of the Financial Sector Assessment Program (FSAP) and technical assistance missions jointly conducted by the World Bank and the International Monetary Fund in 2009. To this end, the State of Côte d'Ivoire was determined to continue its efforts to clean up and revitalize the banking sector, in order to enable it to make a better contribution to the financing of the Ivorian economy. The Ivorian Government then developed a strategy for the restructuring of state-owned banks, which includes, on one hand, the withdrawal of the State from successful institutions in which it holds minority shareholding and, on the other hand, the restructuring of the institutions in which he holds a controlling interest. In addition, by this operation, the State of Côte d'Ivoire wished to confirm its willingness to promote the popular shareholding by selling its shares held in NSIA Bank CI to the public.

It should also be noted that the bank's desire to increase its capital made it possible to combine the sale of old and new shares in the same transaction. For NSIA Bank CI, the capital increase is part of the commitment made by the core shareholders (The NSIA Group and the National Social Security Fund -CNPS) to open the capital of the bank to the public and staff. It was also aimed to achieve the following objectives:

  • Strengthening the Bank's financial resources as part of its development strategy;
  • Improvement and consolidation of prudential ratios;
  • Increasing the Bank's profile with the financial community and the general public by developing a strong and consistent identity;
  • The strengthening of the proximity of NSIA Bank CI with its customers by the acquisition of equity interests;
  • Motivation and loyalty of employees by associating employees with the capital of the Bank.

The proposed structuring made it possible to present an attractive transaction to non-institutional investors as the Ivorian State and the bank were looking for a very popular operation. Thus, the nominal value was divided by ten (10) to allow the setting of the price at 9,000 CFA francs per share. The average value of the bank is 194 billion CFA, the sale price thus indicates a discount / premium of 7%. The value implied at the price of 9000 CFA francs presents a net asset price (P/B) of 3.04, a dividend yield of 5%. This P/B is close to the latest transactions in the regional financial market which is characterized by high value ​​paid by investors to issuers. The multi-channel communication campaign covering all the countries in the area also contributed to the success of the operation. During the open subscription period investors received the proceeds of several other investments (dividends and coupons) which also allowed them to seize the opportunity offered. The involvement of the network of all WAEMU brokers also facilitated the underwriting of investors from all over the Union.

This operation finally brought to light the depth of the regional financial market, especially from non-institutional investors who reside within the region. In fact, non-institutional investors accounted for 69% of the demand expressed, 74% from Côte d'Ivoire, 9% from Burkina Faso and 7% from Benin. The Financial market has once again demonstrated that transactions in the primary market are highly sought after and that supply is not sufficient. At the same time, it also demonstrated that popular savings can be collected and routed to the financing of companies in the region through the regional financial market. However, the preparation deadlines for operations can be prohibitive for issuers who are facing uncontrolled delays not accounted for by the regulator, especially at the closing of operations for the approval of allocation statistics. The processes are constantly improving and allow to anticipate the best for the regional financial market following the current revision of the market’s regulation and the possibility that this review also includes a revision of the operational procedures for issuing permits, monitoring and closing operations.

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