NSE  Building

Obinna Chima examines the performance of some banking stocks accounting for an appreciable share of market capitalisation in the first half of the year

After an uninspiring performance in the past three years, the Nigerian stock market seems to be gradually regaining its vigour. The market enjoyed some appreciation in the first half of the year. This was largely driven by activities on the banking sub-sector of the Nigerian Stock Exchange (NSE).

Investors who had been dissatisfied with the market found solace in banks’ positive first quarter 2012 (Q1’12) earnings. In all, the NSE All-Share Index rose by 871.18 basis points or 4.2 per cent to close at 21,542.24 on June 29, 2012, over the 20,671.06 at the closing bell on January 1, 2012. Similarly, market capitalisation, which estimates the total value of equities on the Nigerian bourse, climbed by a total of N363 billion or 5.6 per cent from N6.514 trillion at the end of the first trading session in 2012 to N6.877 trillion last Friday. According to market watchers, had it not been for the uncertainty arising from the capital market probe and some other factors, the market would have performed better.

Despite the marginal rise recorded by the equities market between January and June this year, analysts have been tempted to predict that the second half of the year would be more exciting for stock market investors on the back of improved banks’ earnings in the course of the year.

GTBank
From the N15 per share it was as at closing bell last Friday, the shares of Guaranty Trust Bank Plc (GTBank) has grown by 6.23 per cent, compared with the N14.12 per share it was on January 3 this year. The highest value GTBank attained in the last six months was the N17.25 per share it stood on May 3, before profit-taking by investors affected it.

The commercial bank which was licensed in August 1990 was the third most capitalised stock on the NSE as at last Friday. GTBank had ascended to the top tier of banks in the country by showing a deep commitment to its reputational and fundamental beliefs.
According to a report by BGL Securities Limited, GTBank’s strengths lies in its historical customer care culture and strong Information Technology platform. “GTBank has built a legacy of good customer service. It is reputed to have a stringent risk regulatory framework for its creation of risk asset.”

FSDH Securities Limited in a separate report also revealed that GTBank’s operations are guided by a set of founding principles called the 8 Orange Rules, which means Simplicity, Professionalism, Service, Friendliness, Excellence, Trustworthiness, Social Responsibility and Innovation.

Zenith Bank
The shares of Zenith Bank Plc which was fourth on the NSE market capitalisation ranking as at last Friday rose by 12 per cent from N12.30 per share, to N13.75 per share. The highest value the commercial bank attained in the first half of the year was the N15.59 per share it stood also on May 3, before its rally was held back due to profit-taking.

Zenith Bank’s full year 2011 results had shown that gross earnings of N244 billion, up by 27 per cent, over the N192.49 billion it was as at December 2010.

Group Managing Director/Chief Executive Officer(GMD/CEO), Zenith Bank, Mr. Godwin Emefiele, said: “we are encouraged by the business outlook and prospects for 2012. We remain increasingly confident that the group will continue to record impressive and superior performance even as the planned spinoff of our non-bank subsidiaries comes into effect.”

First Bank
The shares of First Bank of Nigeria Plc recorded a 20.4 per cent appreciation from N9.07 per share on January 3 to N10.92 per share as at closing bell on the last trading session of the first half the year. The shares of Nigeria’s oldest bank attained its peak in the period under review on February 24, when it closed at N12.30 per share.

GMD/CEO, First Bank, Mr. Olabisi Onasanya, had assured investors that the bank would continue to capitalise on its well established value chain in Nigeria’s financial services sector.

“Recognition of the Bank as one of the strongest and most dependable banks in Nigeria, especially in a time of global downturn, has driven considerable growth in our deposit base,” he added.

United Bank for Africa
THISDAY checks showed that United Bank for Africa Plc’s (UBA) shares performed impressively in the first half of the year. It appreciated by 41 per cent to close at N3.66 per share on June 29, as against the N2.60 per share it was at the beginning of the year. UBA traded largely around the band of N2 per share in the first quarter of the year. Its highest value in the last six months was the N4.17 per share was on May 21.

GMD/CEO, UBA, Mr. Phillips Oduoza, had in a recent interview with THISDAY, advised investors in the bank to always adopt long term investment strategy, saying that “UBA is not probably the stock to look at,” for an investor who wants to get his returns today.
“For an investor that believes that there is life tomorrow, UBA is where you should invest in. As far as UBA is concerned, tomorrow has already come because now we are at the consolidation stage and no more expansion for now. 

“Given our branch network, given the resources we have deployed, our talent, channels, products, our African subsidiaries, any investor looking at the future, which is already here, then, UBA is the place to be,” the UBA boss had said.

Access Bank

Still basking in the euphoria of its acquisition of erstwhile rescued bank-Intercontinental Bank, Access Bank Plc’s shares also rose by 29 per cent to N6.49 per share last Friday, compared with the N5.04 per share it stood at the end of trading on January 3. After hovering around N5 per share at the beginning of the year, Access Bank maintained a gradual, but steady rise until it got to its highest value of N7.63 per share in the first half of the year on March 2.

Access Bank’s ratings were recently upgraded by reputable international and domestic ratings agencies - Standard and Poors, Fitch Ratings and Agusto & Co. The agencies attributed their decision to the bank’s improved market position, strong capitalisation; strong liquidity profile; enhanced distribution network and client base.

The bank said it was efficiently leveraging on its expanded customer base, branch network and quality of management to define its market leadership

GMD/CEO, Access Bank, Mr. Aigboje Aig-Imoukhuede, had said: “We intend to drive profitable, ethical economic growth that is also environmentally responsible and socially relevant.”

Experts’ Opinion
Although the industry’s non-performing loans has drastically been reduced to an average of less than five per cent, experts argued that there still a need for banks to remain cautious in creating risk assets as uncertainty remains in the euro zone where banks are still crying for bailout.

To the MD/CEO, Crane Securities Limited, Mr. Mike Ezeh, stockbrokers no longer analyse the performance of banks with their pre-crisis prices. “We have a set benchmark. We are no longer using the prices they were before the market crashed to measure their performance. So if you look at it that way, banking sector shares performed very well in the first half of the year. The banking sector is the major driver of the market,” Ezeh added.

Commenting on his expectation for the next six months of 2012, Ezeh said, “The market has a self adjustment mechanism. So when that kicks in, with the level the market, especially the banking sector, attained in the first half, we expect to see more positive performance in the next six months.”

But a senior analyst at BGL, Mr. Femi Ademola, argued that the performance of the sector may be affected by the new Central Bank of Nigeria (CBN) policy that bars commercial banks from using their reserves to recapitalise their African subsidiaries.
“To a large extent, there are still lots of uncertainties. The policy will affect some of the banks going forward. Look at UBA, GTBank, if those subsidiaries are not able to raise funds to recapitalise, what will happen to them?” Ademola queried.