Obinna Chima highlights the performance of some of the most capitalised banking stocks, following the release of their third quarter results
It has been a very inspiring earnings season for commercial banks as they churn out their third quarter 2012 financial performances.
The corporate earnings reports were full of signs that the financial institutions that went through ‘healing school’ few years ago, following the acquisition of their non-performing loans (NPLs) by the Asset Management Corporation of Nigeria (AMCON) are now on the path of growth.
The stock market has been upbeat since this month as investors absorbed the positive results. Activity in the Nigerian stock market is largely dominated by the banking sub-sector; thus, major market indices have been on the upswing following the release of banks’ positive earnings.
Specifically, the Nigerian Stock Exchange (NSE) All-Share Index jumped by 864.44 basis points to 26,876.07 on October 24, as against the 26,011.63 points it was as at closing bell of September 28, 2012. Similarly, the NSE market capitalisation improved to N8.565 trillion on October 24, from N8.286 trillion as at September 28. The NSE’s third quarter performance was its best since first quarter 2010.
The introduction of market markers on the Nigerian bourse has also contributed to the renewed appetite for equities. Market-making activities began in the third quarter for the purpose of increasing liquidity and investor confidence.
A total of twenty-five stocks have now been selected by the NSE to be in the portfolio of market makers in the preliminary six months trial phase of the scheme. Nine banking, six consumer goods and two building materials stocks have been selected as part of the scheme, which further shows the dominance of these sectors on the index
From the N15.30 per share it stood on the first trading session of the third quarter, the shares of Guaranty Trust Bank Plc (GTBank) has grown remarkably by 31 per cent, compared with the N20 per share it attained last week Wednesday.
The commercial bank’s rally was buoyed by its latest quarterly earnings. GTBank is the highest-priced equity on the banking sub-sector of the NSE. It reported a profit after tax of N63 billion for the third quarter (Q3) ended September 31, 2012.
It also posted gross earnings of N45.64 billion in Q3, up by 22 per cent from the N126.895 billion in the corresponding period of 2011. The financial institution’s profit before tax rose by 48.6 per cent from N50.988 billion in 2011 to N75.581 billion, while profit after tax recorded a higher growth of 59 per cent from N39.69 billion to N63 billion.
Financial market analysts noted that the bank had a healthy balance sheet, saying the bank is well funded, strongly capitalised bank.
The commercial bank, which was licensed in August 1990, was the most capitalised stock on the banking sector as at last Wednesday with a total market capitalisation of N588.623 billion. GTBank had ascended to the top tier of banks in the country by showing a deep commitment to its reputational and fundamental beliefs.
The shares of Zenith Bank Plc which was the second most capitalised stock on the banking sub-sector has so far risen by 24 per cent from N14.50 per share on July 2, to N17.50 per share last Wednesday. Zenith Bank declared N21.524 billion in its profit after tax for unaudited third quarter financial report ended September 30 2012.
According to the results, the bank increased its profit for the period by N21.524 billion or 50.6 per cent from N42.537 billion in 2011 which stood at N64.061 billion recorded in 2012. Its profit before tax increased from N53.129 billion in 2011 to N75.223 billion. The interest and similar income of the bank rose from N122.588 billion in 2011 to stand at N168.219 billion in 2012, indicating an increase of N45.631 billion or 37.22 per cent.
Group Managing Director/Chief Executive Officer (GMD/CEO), Zenith Bank, Mr. Godwin Emefiele, said recently: "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 spin-off of our non-bank subsidiaries comes into effect."
The shares of First Bank of Nigeria Plc recorded a 47 per cent appreciation in the last 80 trading sessions monitored on the NSE as it climbed from N11.02 per share on July 2 to N16.21 per share as at closing bell last Wednesday. The market is presently awaiting the Q3 earnings of the bellwether stock.
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.
Access Bank Plc's shares also rose significantly by 36 per cent to N9 per share last Wednesday, compared with the N6.63 per share it stood as at July 2. The bank, which had enjoyed positive ratings from international agencies such as Standard and Poor’s and Fitch, is currently reaping the gains of its acquisition of former Intercontinental Bank.
Its third quarter results which confirmed this showed that its gross earnings improved by 88 per cent to N162.3 billion, compared with the prior year figure of N86.3 billion. Its profit before tax also stood at N39.1 billion, up by 116 per cent, over the N18.1 billion attained in September 2011. Access’ net interest income was also N76.5 billion, up by 67 per cent.
GMD/CEO, Access Bank, Mr. Aigboje Aig-Imoukhuede, said: “Our robust capital adequacy and liquidity ratios leave us in a strong position to pursue attractive business opportunities during the fourth quarter and beyond. We deemed it prudent during the period to dispose of the entire Financial Accommodation Bond portfolio which we inherited following our acquisition of Intercontinental Bank; this led to an increase in our operating expense due to rediscounting losses.”
United Bank for Africa
United Bank for Africa Plc (UBA) shares has also been upbeat since it announced its performance in Q3. UBA advanced by 29 per cent to close at N4.80 per share on October 24, from N3.71 per share on July 2. Analysts argued that at its current price, UBA has more growth prospects.
The bank reported a profit before tax of N44.8 billion in Q3 of 2012, showing a jump of 376 per cent above the N9.4 billion recorded in the corresponding period of 2011. Other highlights of the result prepared with International Financial Reporting Standards (IFRS), showed that profit after tax rose from N7.4 billion to N39.1 billion, while gross earnings grew from N138.5 billion in 2011 to N168.2 billion in 2012.
Commenting on the performance, the GMD/CEO, UBA Plc Mr. Phillips Oduoza, said “we continue to pursue our unique strategy of maintaining diversified business in terms of geography and earnings mix.”
From a loss position in 2011, Diamond Bank’s positive Q3 results, which was announced recently, has continued to influence its share price growth. THISDAY checks showed that the commercial bank’s stock recorded 93 per cent share price appreciation in the last 80 days, from N2.20 per share as at July 2, to N4.25 per share last Wednesday.
The Diamond Bank was the first bank to announce its Q3 results. According to unaudited result, Diamond Bank grew its gross earnings from N74.646 billion in Q3 of 2011 to N110.108 billion in 2012. Profit before tax stood at N23.216 billion, compared with a loss of N6.924 billion in 2011, while profit after tax was N18.17 billion as against a loss of N6.1 billion in 2011.