Full Year 2013 earnings from bellwether banks, Zenith Bank and GTBank, expected this week, will provide more clarity to investors about the level of profitability in Nigeria’s banking sector as lenders see profits slow from increased regulations.
The results may also provide a catalyst for the next leg-up or down for equities as banking names collectively make up about 30 percent of total market capitalisation for the Nigerian Stock Exchange (NSE) All Share Index (ASI).
In terms of benefit to shareholders, analysts expect that the duo will not depart from what obtained in the past in terms of a tradition of dividend payouts.
Nigerian bank earnings slowed in the most recent quarter (Q3) as lenders struggled to boost profit on elevated cash reserve requirements (CRR) and reduction in fees (COT).
However, at the NSE yesterday, more investors favoured GTBank and Zenith Bank in their equities portfolio pick, a development which pushed their share prices higher.
The share price of GTBank plc rose by N1.01kobo from an initial level of N24.99 to N26, while Zenith Bank gained N0.15kobo from N21.45 to N21.60, though some schools of thought within the market feared a possible shrinkage in these banks’ balance sheet size, particularly their net interest margin, following the tightened monetary policy environment in which the banks operated during the period.
Recall that in its unaudited results for nine months ended September 30, 2013, Zenith Bank plc reported Gross Earnings of N255.299 billion, an increase of 11.41 percent against N229.161 billion in the corresponding period of 2012.
Profit Before Tax was N83.037 billion against Q3’12 level of N75.223 billion, up by 10.39 percent; while Profit After Tax rose slightly by 8.88 percent to N69.751 billion in Q3’13 against N64.061 billion in Q3’12. The bank’s earnings per share (EPS) in the third-quarter of 2013 was 220 against 202, up by 8.91 percent.
Also in Q3’13, Zenith reported Net Interest Margin of 9.47 percent, from 8.91 percent in same period of 2012. Cost-to-Income Ratio (CIR) was 55.84 percent, against 55.07 percent in Q3’12. Loan-to-Deposit Ratio stood at 52.22 percent, against 56.65 percent in same period of 2012.
“I expect Zenith to post N106 billion in PBT; a mild 4 percent year-on-year (YoY) growth; albeit PAT will be soft at N89 billion, implied 19 percent return on average equity and a 12 percent decline from previous year’s level due to non-recurring tax credit earned in 2012,” Rasaq Abiola, lead analyst at UBA Capital, told BusinessDay.
“I expect Zenith to declare N1.80 dividend, translating to 64 percent payout ratio, given its adequate capitalisation and less need for earnings retention. Our dividend expectation on Zenith is an attractive 8.4 percent yield on current market valuation of the stock.”
Sewa Wusu, analyst at Sterling Capital, said: “In terms of benefit declaration to shareholders, I do not see any departure from what was obtainable in the past. I think Zenith will maintain its traditional dividend payout. GTBank will also follow suit. But we might see some strain or shrinkage in their balance sheet size, particularly their profitability.”
He foresees a likely decline in these banks’ net interest margin (NIM) following the tightened monetary policy environment in which the banks operated during the period (2013 financial year). “By and large, we expect to see benefit declarations maintained. We also think that in spite of the liquidity challenge, some of the banks can still weather the storm,” Wusu added.
Guaranty Trust Bank had in the nine months ended September 30, 2013 reported a Profit Before Tax of N82.36 billion, indicating a 7.12 percent increase over N76.89 billion recorded in the corresponding period of 2012. The bank’s Profit After Tax (PAT) in Q3’13 stood at N69.24 billion as against the N63.734 billion earned in the comparable period of 2012. It also in Q3’13 reported Gross Earnings increase to N181.96 billion from N166.48 billion the previous year. The bank’s total assets in Q3’13 stood at N1.875 trillion compared to the N1.73 trillion as at December 2012.
On his expectation of GTBank FY 2013 scorecards, Abiola said: “We expect GTBank to gross its 2013 FY PBT to N108 billion, with expected PAT of N91 billion; implied 31 percent return on average equity and 5 percent YoY growth in earnings. We look forward to N1.45 per share final dividend (in addition to the N0.25 interim dividend per share). The final dividend translates to 5.8 percent yield on current price of the counter.”
Femi Ademola, head, research & intelligence, BGL plc, projects Gross Earnings of N244.13 billion for GTBank. He also projects a likely report of N109.37 billion in PBT by GTBank, N92.02 billion in PAT, Net Interest Margin of 8.9 percent, dividend per share of N1.3 (totalling N1.55 with the interim dividend), and total assets of N1.92 trillion.
On Zenith Bank, the analyst projects Gross Earnings of N337.79 billion, PBT of N113.24 billion, PAT of N92.85 billion, Net Interest Margin of 6.01 percent, dividend per share of N1.60, and total assets of N2.91 trillion.
Iheanyi Nwachukwu
