Expectations high as banks set to release 2017 full-year results

Full-year financial results of Nigeria’s top banks are expected as early as next week to break the bearish sentiments that have taken over the market. A bullish run in 2017 had seen the market rising 42 percent to emerge the third best performing stock market in the world.
Even though the bullish run had continued in January, with the market rising a further 19 percent, the second week of February however recorded a reversal of that trend. The All Share Index (ASI), which measures average changes in the prices of listed companies, fell 3.39 percent for the trading week ended February 9, wiping N543 billion off the value of the market. Now, the expectation is that the financial results of top banks, which could hit the market as early as next week, could see the return of the bulls to the market.
Guaranty Trust Bank plc, Zenith Bank plc, United Bank for Africa plc, and Access Bank plc, usually classified as Tier-I banks, are expected to blaze the trail with their full-year results released to the Exchange.
Already, the board of directors of these Tier-1 banks have met and discussed their consolidated and audited financial statements as well as proposed dividend payments to shareholders. In line with the post-listing requirements of the Nigerian Stock Exchange (NSE) for quoted companies, these tier-1 banks have since commenced the “closed periods” for trading in their shares.
In the “closed period,” the banks insiders and connected persons are prohibited from buying, selling, transferring or otherwise dealing in the banks’ shares until the full-year results are released to the investing public at the NSE.
Guaranty Trust Bank closed period started since January 4, 2018, while the bank’s Board meeting held on January 24. The board of directors of Zenith Bank also met following the bank’s closed period since January 8. The Board of United Bank for Africa met on January 29 following the bank’s closed period, which started since January 12. Access Bank closed period started since December 30, while the bank’s Board meeting held on January 30. Stanbic IBTC Holdings Plc board meeting held on February 1.
The results of the banks are already awaiting the approval of the Central Bank of Nigeria (CBN) ahead of their expected filing later this month at the NSE for the investing public.
Analysts at Capital Bancorp expect the top banks to report higher interest income in 2017 financial year “on the back of the high interest rate environment observed during the period, while we expect an increase in cost-to-income ratio (CIR) for the period.”
Already, analysts are positive about the results from the top banks.
Zenith Bank is one of the banks that is expected to outperform due to its low non-performing loans, current balance sheet size and strong capital adequacy ratio (CAR), which stands at 21 percent.
In its unaudited results for the nine months ended September 30, 2017, Zenith Bank grew its gross earnings to N531 billion, up by 39.7 percent against N380 billion in the corresponding quarter of 2016, while Profit Before Tax (PBT) was N153 billion from N117 billion, an increase of 30.8 percent.
FSDH Research in their February 9, 2018, Economic and Financial Outlook set a target price (TP) of N38 per share for Zenith Bank.
Similarly, third quarter results for GTBank showed it recorded N309.9 billion in gross earnings, down by 6 percent from N329.28 billion in same period of 2016. Profit after taxation rose by 5 percent to N126 billion from N120 billion in 2016. Cordros recommend a BUY for the stock, even as the bank has surpassed the analysts N46.01 target price.
FSDH analysts have set a target price of N17 for FBN Holdings plc. The Holdco reported N441 billion gross earnings in nine months to September 30, 2017; up 6 percent from N417 billion in same period of 2016. Profit for the period under review rose by 8 percent to N46 billion against N43 billion in 2016. The FBN Holdings is the parent company of First Bank Nigeria Limited, another tier-1 bank.
FSDH Research also set a target price of N17.5 per share for United Bank for Africa. UBA gross earning in nine months to September 2017 rose by 26 percent to N334 billion from N266 billion. The bank’s profit in the period under review stood at N61 billion, up by 23 percent from N50 billion in same period of 2016.
Access Bank results for the nine months ended September 30, 2017, showed 33 percent growth in gross earnings year-on-year (yoy) from N275 billion to N365 billion. The group delivered increase in pre-tax profits from N69 billion in September 2016 to N73 billion in September 2017 and closed the period with a 4 percent year-on-year growth in profit after tax.
Profit after Tax (PAT) grew to N56 billion in 2017 from N54 billion in 2016. FSDH has set a N15 per share target price for Access Bank.

FSDH analysts believe that the NSE Banking Index, which was up by 73.32 percent in 2017, could still rise higher this year. “The improvements in the price of crude oil and production had a positive impact on the loans extended to the oil and gas sector. The stability in the foreign exchange has also had a positive impact on the operations of the companies in the banking sector.”
The top banks have already seen significant gains in their share price this year. Price lists of stocks as of Friday February 9, 2018, showed that Access Bank shares at N11.95 is already up 14.4 percent since January; GTBank at N48 has risen by 17.8 percent year-to-date; FBN Holdings at N12 is by 36.4 percent, while UBA share price at N12 has risen by 16.5 percent this year.
Zenith Bank at N30.90 per share has appreciated by 20.5 percent, while Stanbic IBTC share price is already up by 10.8 percent to N46 per share.

 

Iheanyi Nwachukwu