Beaten down Nigerian banks have been rallying in the past week, a sign that
the low expectations for FY 2014 results may be met and exceeded as earnings announcements begin to trickle in.
Guaranty Trust Bank (GTB) led bank stocks higher on Friday as it rose 10.21 percent to close at N24.28 per share.
First Bank, the nation’s largest lender by assets gained 10.13 percent to close at N8.81, while Zenith Bank rose by 10.2 percent to close at N20.94 per share.
Investors were reacting positively to GTBs FY 2014 results which showed growth at the top and bottom-line, after fears that lenders may be pressured by Nigeria’s uncertain macro environment and tight regulatory environment.
GTB reported on Friday that gross earnings increased by 15 percent, while profit before tax (PBT) rose by 8.68 percent to N116.39 billion.
Net income was up by 9.63 percent to N98.69 billion and the lender also declared a final dividend of N1.75 per share.
“We remain committed to maximising shareholder value and delivering superior and sustainable returns. Our objective is to remain a leading
player in the financial services sector whilst expanding our franchise in
select, high growth African markets where we believe we have a competitive advantage,” Segun Agbaje, GTB CEO said in a statement.
Zenith Bank another tier one lender released FY 2014 results on Friday showing that Gross earnings of the Group increased by 14.76 percent to N403.3 billion while profit after tax increased by 4.9 percent to N99.27 billion.
Investors sold off bank stocks since the middle of last year in fears of a slump in profitability from tighter monetary policy, oil price collapse and higher loan losses.
The Nigerian Stock Exchange Banking 10 Index has outperformed the market and down -5.15 percent this year (March 05) compared with a -12 percent slide in the broader market index, as investors bought beaten down bank stocks.
Investors have put a premium on GTB by valuing it at 2.02xs book value, compared to 1 xs for Zenith, 0.75x for Access, and 0.6 xs for First Bank and UBA, according to Bloomberg data.
Fitch recently affirmed the Long-term Issuer Default Ratings (IDRs) of 10 Nigerian banks, in a sign that the sector remains resilient.
They are Zenith Bank Plc (Zenith), FBN Holdings Plc (FBNH), First Bank of
Nigeria Ltd (FBN), United Bank for Africa Plc (UBA), Guaranty Trust Bank Plc (GTB), Access Bank Plc (Access), Diamond Bank Plc (Diamond), Fidelity Bank Plc (Fidelity), Union Bank Plc (Union) and First City Monument Bank Limited (FCMB).
Fitch noted that while the Nigerian operating environment is affected by persistently low oil prices, continuing pressure on the domestic currency naira, likely further monetary policy and regulatory actions and increased political uncertainty, at the same time, the ratings are underpinned by continued strong underlying economic growth, particularly in non-oil sectors.
Fitch expects non-oil GDP growth of 5.5% in 2015 (2014: 7.5%), driven by continued economic reforms and limited impact from public sector austerity.
Fitch forecasts sector non-performing loans (NPLs) to rise above the Central Bank of Nigeria’s (CBN) informal cap of 5 percent, but below 10
percent by end-2015, reflecting high credit concentrations as well as emerging risks, particularly in the oil and gas, and power sectors.
Zenith Bank bucked Fitchs expectation of deteriorating asset quality as its non performing loan ratio fell to 1.8 percent in 2014 from 3 percent in 2013.
PATRICK ATUANYA
