Value of 14 Banks’ Stocks Appreciate Marginally by N73.09bn Despite Decline in Corporate Earnings for 2021

Kayode Tokede 

On the heels of investors apathy, coupled with decline in corporate earnings for 2021 financial year and the first quarter of 2022, the values of 14 listed banks on the Nigerian Exchange Limited (NGX) added just N73.09 billion in five months of 2022 as investors trade with caution.

According to THISDAY findings, six listed banks on the NGX recorded decline in stock prices, while others reported marginal increase in the period under review. 

It has been a challenging 2022 so far for Nigerian bank stocks as its Year-to-date performance, according to NGX banking index rose marginally by 4.8 per cent and has grossly underperformed the broader stock market gauge that has gained 24.05 per cent in Year-till-Date (YtD) performance.

The 14 banks are; Access Holdings Plc, United Bank for Africa (UBA) Plc, Zenith bank Plc, Ecobank Transnational Incorporated (ETI), Guaranty Trust Holding (GTCO) Plc and FBN Holdings Plc.

Others are Union Bank for Nigeria Plc, Stanbic IBTC Holdings Plc, FCMB group Plc, Wema Bank Plc, Sterling Bank Plc, Fidelity Bank Plc, Jaiz Bank Plc and Unity Bank Plc.

Most of the listed heavyweight banks such as GTCO, Stanbic IBTC Holdings, UBA and Zenith Bank have witnessed a decline in stock prices as investors marked them for profit-taking, according to a Lagos-based capital market analyst. 

According to data by the NGX, GTCO recorded its highest drop in stock price in five months, while Wema Bank has witnessed a significant increase in its stock price.

GTCO’s stock price fell by 13.3 per cent or N3.45 per share to close May 31, 2022 at N22.55 per share from N26.00 per share it opened for trading. The lender’s value on the NGX has depreciated by N101.5billion over the last five months.

GTCO in its Q1 2022 financial result announced N43.21 billion profit, representing a decline of 5.13per cent from N45.55 billion reported in Q1 2021. 

The Holding also reported earnings per share of N1.51, a 5.63prer cent drop from the N1.60 reported a year earlier in 2021.

Aside GTCO, the value of Stanbic IBTC Holdings has also depreciated by N32.39billion in five months when its stock price depreciated by 6.9 per cent or N2.50 per share to N33.50 per share from N36.00 it commenced trading this year. 

Stanbic IBTC in its Q1 2022 financial result revealed a profit of N15.07 billion, representing an increase of 33.87 per cent year-on-year.

The bank also reported earnings per share of N1.11, a 35.37 per cent growth from the N0.82 reported a year earlier in 2021.

In Q1 2021, the bank’s profit got slashed by 45per cent compared to Q1 2020, still reeling from the impact of the pandemic and its adverse effect on businesses. However, in Q1 2022, we can see the bank’s profit starting to recover.

“The shareholders of Stanbic IBTC last week  approved a N2.00 dividend  payout and its impact on the financial institution stock price on the bourse, ”said analyst at PAC Holdings, Mr. Wole Adeyeye.

However, Wema bank in the five months of 2022 has gained N102.99billion in five months, on the backdrop of N2.67 per share or 370.8 per cent gain in its stock price. 

Commenting, the Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion noted that weak corporate earnings forced investors to divest into other fundamentals stocks on the bourse.

According to him, “Most listed banks on the NGX struggled in their Q1 2022 results. However, with the hike in interest rate by CBN, banks will definitely benefit and it is going to impact on the interest margin next quarter.

“Most Nigerian banks stocks are undervalued when compared to African bank stocks. Once Nigerian banks’ earnings improve, they will be attractive to domestic and foreign investors. The exit of foreign investors has also led to dwindling banking stocks on the Exchange as they played a critical role in driving prices. Foreign investors play in banking stocks where their investment is protected by regulators.”

He added, “GTCO is dropping due to its decline in corporate earnings  coupled with foreign investors taking profit-taking.”

Analysts at Coronation Research in their latest report titled, ‘Nigerian Banks: Q1 22 earnings review’ said, “The narrative that the fundamentals of the banking sector are compelling has persisted, even as investor apathy around bank stocks remains. In our view, although bank margins and profitability have come down slightly in recent years, bank stocks have been oversold. 

“In an environment where negative inflation-adjusted yields remain the theme, bank dividends continue to offer more attractive yields than Treasury bills. In addition, with yields on the rise, we think FY 2120 may have been the bottom in terms of banks’ profitability.”

Analysts at Financial Derivatives Company (FDC) in a presentation said Nigerian equities would remain popular among investors as yields in the fixed income space decline and inflation continues its upward trend.

The analysts, in their presentation at Lagos Business School March breakfast meeting, said investors would buy into fundamentally strong stocks with attractive valuations in a post-election year.

On the downside, they see the stock market being sensitive to economic and political vulnerabilities, even as they expect the increased cost of borrowing to further reduce the profitability of listed companies.