With a Combine N1.562trn, Zenith Bank, GTCO Emerge Most Capitalised Banks on NGX

Kayode Tokede

Following  a 7.7 per cent and 10.87 per cent increase in their share price in the first quarter of 2023, Zenith Bank Plc and Guaranty Trust Holding Company Plc (GTCO) outpaced other Deposit Money Banks (DMBs) to emerge most capitalised banks on the Nigerian Exchange Limited (NGX).

Zenith Bank shares increased by 7.7 to to N25.85 per share as of March 31, 2023 from N24.00 it closed for trading in 2022, lifting its market capitalisation to N811.6billion, while GTCO’s stock appreciated by 10.87 per cent to N25.50 per share from N23.00 per share to reached N750.5billion in market capitalisation.

Zenith Bank since January 2022 outpaced GTCO as the most capitalised when its stock price closed trading at N25.50 per share.

Capital market analysts hinted that the anticipation of a robust dividend for the 2022 financial year and the fundamentals of Zenith Bank attracted foreign investors.

They however stressed that investors are losing confidence in GTCO over the management’s adoption of the Holdings structure, among others.

Commenting, the Vice Vice President, Highcap Securities, Mr. David Adnori stated that the early filing of 2022 financial year result and accounts and dividend payout to shareholders repositioned Zenith bank stock in the period under review.

According to him, “The Holdings structure should have been advantageous but it is no longer serving as an advantage to the bank because of the negative influence of the above issues.”

Zenith Bank had announced eight per cent drop in profit after tax from N244.6 billion in 2022 to N223.9 billion because of the increase in the Group’s effective tax rate from 12.7per cent in 2021 to 21.3per cent in 2022.

The Bank between 2022 and 2021 declared a sum of N468.47billion profit and proposed to shareholders a dividend of N197billion.

A capital market analyst, Mr. Rotimi Fakeyejo said records in the last five years have shown that Pension Fund Administrators (PFA) and foreign investors are always sceptical about investing in Holdings structure.

Meanwhie, Stanbic IBTC Holdings Plc maintained the third position as the top three most capitalised DMB stocks on the NGX with about N487.18billion, followed by FBN Holdings with about N398.44billion in market capitalisation.

Stanbic IBTC Holdings reached N37.60 per share as of March 31, 2023, representing an increase of 12.4 per cent from N33.45 per share from December 31, 2022 amid N80.81billion profit after tax in  2022 FY from N56.97billion reported in 2021.

The board and management of Stanbic IBTC declared final dividend of 200 kobo per share in line with our commitment to delivering value to shareholders.

However, the 14 DMBs listed on the NGX are valued at N3.84 trillion as of March 31, 2023, accounting for about 13 per cent out of N29.54 trillion total market value.

The stock market rallied by 5.82 per cent in the Q1 2023, capitalizing on the gains recorded in the previous year (2022: 19.98 per cent) with the NGX Banking Index gaining 8.50 per cent to close at 452.97 basis points.

Unity Bank Plc and Jaiz Bank Plc, according to the tracked DMBs listed on the Exchange recorded decline in stock prices, a development that impacted their market capitalisation.

As the stock price of Unity Bank dropped to N0.51 per share from N0.55 per share it opened for trading in 2023, its market value stood at N5.96 billion. Jaiz Bank shares amid N0.05 dividend dropped to N0.9 per share from N0.92 it opened for trading in 2023.

Jaiz Bank, thus closed Q1 2023 with N31.09 billion market capitalisation.

The banking sector in Q1 2023 faced hike in the Monetary Policy Rate (MPR), currency swap policy of the Central Bank of Nigeria (CBN) that led to massive cash withdrawals and uncertainty surrounding the outcome of 2023 general elections.

In the global market, three small- to mid-size U.S. banks failed this year, triggering a sharp decline in global bank stock prices and a swift response by regulators to prevent potential global contagion.

Commenting on banking stocks, analysts at Coronation in a report titled, “Nigerian Banks: A year of Resilience and Grit,” said Nigerian banks currently trade at significant discounts to peers and thus offer an attractive entry point with a further case made by attractive dividend yields.

According to the report, “In 2023 we expect the Nigerian banking industry to face pressures stemming from stringent regulations, high inflation, continuous dollar shortages and even asset quality issues.

“Nonetheless, we expect modest growth in earnings from the banks featured, driven by rising interest rates, a strong contribution from non-interest revenue derived from FX revaluation gains, growth in nonbank businesses and digital banking.”

The firm disclosed that Nigerian banks largely underperformed the broad equity market in 2022 returning only 2.8per cent in price terms vs 19.9per cent for the NGX All-Share Index.

“We believe that the market’s lack of enthusiasm stemmed from a combination of low earnings growth post-Covid and the inability of foreign investors readily to repatriate dividend and capital proceeds.

“We believe Nigerian banks currently trade at significant discounts to peers and offer an attractive entry point with a further case made by attractive dividend yields,” the report added.