The banking sector has experienced a material shift in its operating environment since our last publication in January 2024. This shift was due to aggressive policy decisions, which were mostly inspired by efforts to contain the currency crisis and surging inflation, and improve banks' capacity to withstands unexpected changes in key variables. In this report, among other things, we assess potential changes in net earnings and 12-month target prices (TP) of our coverage banks that may be occasioned by the following:
• The new requirement that the NOP limit of the overall foreign currency (FCY) assets and liabilities of banks should not exceed 20.0% short or 0.0% long of shareholders' funds unimpaired by losses
• Discontinuation of daily CRR debits and the adoption of a structured weekly statutory debit on the increases in banks' weekly average adjusted deposits
• Sharp increases in stop rates at auctions and the 400bps increase in monetary policy rate to 22.75%
• The increase in statutory CRR from 32.5% to 45.0%
• The adjustment of the asymmetric corridor to +100bps/-700bps from +100bps/-300bps, previously
