Broad Street, Lagos
Festus Akanbi and Funke Adewale
As quoted money deposit banks are busy collating their full year results for 2012 financial year, investors have continued to swoop on the banking subsector of the Nigerian Stock Exchange (NSE) with the attendant jump in bank share prices.
Informed market operators said the sustained appetite for bank shares is fuelled by the speculation that most banks are likely to churn out very impressive results based on the significant improvements in their performances in the third quarter of the year.
However, despite the rush for bank shares, a leading operator in the nation’s capital market and Chief Executive, Investment One Financial Services Limited, Mr. Nicholas Nyamali, has said shares in the Nigerian bourse is grossly undervalued.
Nyamali said given the impressive fundamentals of some of the companies on the exchange, especially banks, it is difficult to agree that their present share prices are the true reflections of the values of the companies listed on the stock exchange.
Meanwhile, THISDAY checks last week showed that the scramble for bank shares has led to a corresponding rise in prices of bank shares, a tempo which analysts said is likely to be sustained till the first quarter of next year.
For instance, it was harvest time for investors at the trading of November 18, when the financial services sector (measured by turnover volume) accounted for 876.900 million shares valued at N5.328 billion traded in 11,454 deals.
Similarly, in the trading that took place on December 2, the banking sub sector of the financial services sector was the most active during the week (measured by turnover volume); with 471.559 million shares worth N3.856 billion exchanging hands among investors in 7,836 deals
The volume of shares sold in the banking subsector was largely driven by activities in the shares of Access Bank Plc, FBN Holdings Plc and Zenith Bank Plc.
A random comparison of bank share prices between June 21 and December 13, for instance, showed that apart from the surge in demand for bank shares, many of the banks have recorded a substantial improvement in their share prices.
At the trading last Wednesday, Access Bank Plc, Diamond Bank, Ecobank Transnational and Fidelity Bank Plc traded for N9.08, N4.79, N10.92 and N2.32 respectively as against N6.10,N2.15,N10.50 and N1.21 which they were sold at the trading of June 21.
Similarly, the banks also witnessed a tremendous jump in the quantity of their shares that exchanged hands at last week’s trading.
For instance, at last Wednesday’s trading, the quantities of shares that exchanged hands for Access Bank, Diamond Bank, Ecobank and Fidelity Bank were put at 26.6 million, 18 million, 5 million and 17 million respectively whereas for the June trading, the banks recorded 8 million, 5.4million, 4 million and 7.1 million transactions respectively.
Access Bank’s third quarter results 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.
It was also a harvest time for investors in GTBank, which traded at N21.50 last Wednesday as 39.4 million exchanged hands as against the share price of N15 on June 21 when 7 million shares of the bank were traded. It reported a profit after tax of N63 billion for the third quarter (Q3) ended September 31, 2012.
Zenith Bank was another beneficiary of the rush for bank shares last week Wednesday as it traded for N17.88 on a day when 62million units of the bank shares were traded.
The bank’s share price was put at N13.30 on June 21 when investors traded in 10.2 million units of the bank’s shares. Zenith Bank declared N21.524 billion in its profit after tax for unaudited third quarter financial report ended September 30 2012.
A combination of new management and optimism in the bank’s performance is lifting the share value for Union Bank Plc. At last Wednesday trading, a unit of Union Bank shares sold for N7.35, a far cry from N3.40 it attracted six months ago.
UBA Plc, which sold for a paltry N1.09 per share at the June 21 trading, was last week sold for N4.83 in a trading where 31.3 million units of the bank’s shares exchanged hands. 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.
Insisting bank shares are still undervalued, Nyamali said “When you look at the fundamentals of some of the stocks and the Nigerian stock market, you will find out that stocks in the exchange are grossly undervalued. Generally, few of them have good valuations, but if you take a sector like the banking sector, that is totally undervalued. You have stocks in the banking sector that are doing price to earnings ratio of five, six which is extremely low for an emerging market like ours.”