* Renaissance says ICB's margin loan exposure at 15 pct
* Says current cover on margin loan book at 70 pct
* Keeps 'hold' on ICB shares, tgt 10 naira vs 13
By Nick Tattersall
LAGOS, April 8 (Reuters) - Nigeria's Intercontinental Bank has enough capital to absorb its asset risks and there is no threat to its solvency, analysts from Renaissance Capital said on Wednesday after being shown the bank's balance sheet.
Weak disclosure requirements in Nigeria have fuelled concern about the health of its banks, particularly their exposure to falling capital markets after explosive balance sheet growth in recent years saw them take on higher levels of unsecured risk.
Intercontinental (ICB) has been a focus of concern. Its stock has fallen 46 percent over the past three months in high-volume trading amid speculation its capital base is at risk from margin loan exposure and other non-performing loans.
"The market is currently pricing the stock as a distressed asset and not as a going concern," Renaissance Capital said in a research note, maintaining a "hold" rating but lowering its target share price to 10 naira from 13.
"By publishing ICB's asset risks and stress-testing them, we hope to close the chapter on the de-marketing of this name and provide investors with the means to assess these risks."
Renaissance said an "aggressive assumption" would put the total capital at risk at Intercontinental at 90 billion naira ($618 million) and that its capital adequacy ratio would still be 15 percent even after absorbing that full charge.
Based on discussions with the bank, it said its margin loan exposure was 15 percent of total loans and that the current cover on the margin loan book stood at 70 percent plus an additional 10 percent of collateralised assets.
"While there are risks to ICB's capital base and these risks need to be appropriately priced in by the market ... they can be absorbed by the ICB balance sheet," Renaissance said.
"While maintaining its solvency is not a challenge for the group, we believe that the key operational concerns relate to its balance sheet structure and cost base."
DEMAND FOR GREATER DISCLOSURE
Nigerian banks are under pressure from tight liquidity, potential toxic assets from capital market lending and the negative balance sheet impact of higher loan-loss provisioning and capital depletion due to the global crisis.
The central bank has warned sub-Saharan Africa's second biggest economy cannot afford a bank failure and has stepped up monitoring to try to prevent contagion if any bank were to fail.
Private sector credit outstripped government spending for the first time in 2008 and this year banks are expected to provide much of the government's estimated 1.6 trillion naira borrowing needs. A systemic banking crisis would be disastrous.
ICB's decision to open its balance sheet up to Renaissance Capital makes it the latest bank to try to address concerns about disclosure levels in Nigeria.
Access Bank and First Bank both said this week they were adopting international financial reporting standards (IFRS), joining Guaranty Trust Bank as the few Nigerian financial services firms to have done so.
Renaissance said ICB's key challenges were to restructure its balance sheet and reduce costs.
It noted the bank's high exposure to short-term customer deposits, saying 70 percent of the bank's liabilities had a duration of 0-30 days, making its balance sheet volatile.
It also noted the bank's deposit base had fallen 31 percent over the past nine months, partly due to the repayment of about $590 million of the $750 million of foreign currency deposits it held in February 2008. Renaissance also said ICB was able to meet its obligations to all of its foreign depositors. (For full Reuters Africa coverage and to have your say on the top issues, visit: http://af.reuters.com/) (Editing by Randy Fabi and Andrew Macdonald) ($1=145.70 Naira)