Share value of 14 banks appreciates slightly by N73.09 billion despite lower corporate profits for 2021

Kayode Tokede

On the heels of investor apathy coupled with declining corporate earnings for fiscal 2021 and the first quarter of 2022, the stocks of 14 banks listed on the Nigerian Exchange Limited (NGX) added just 73, 09 billion naira in five months of 2022 as investors trade cautiously.

According to THISDAY’s findings, six NGX-listed banks saw declines in share prices, while others reported marginal increases during the review period.

2022 has been a difficult year for Nigerian bank stocks so far, as its year-to-date performance, according to the NGX Banking Index, edged up 4.8% and was significantly underperforming. performed the broader stock market gauge which gained 24.05% in one year. performance to date (YtD).

The 14 banks are; Access Holdings Plc, United Bank for Africa (UBA) Plc, Zenith bank Plc, Ecobank Transnational Incorporated (ETI), Guaranty Trust Holding (GTCO) Plc and FBN Holdings Plc.

The others are Union Bank for Nigeria Plc, Stanbic IBTC Holdings Plc, FCMB group Plc, Wema Bank Plc, Sterling Bank Plc, Fidelity Bank Plc, Jaiz Bank Plc and Unity Bank Plc.

According to a Lagos-based capital market analyst, most major publicly listed banks such as GTCO, Stanbic IBTC Holdings, UBA and Zenith Bank have seen falling stock prices as investors flagged them for valuations. profit taking.

According to NGX data, GTCO recorded its biggest share price decline in five months, while Wema Bank saw a significant increase in its share price.

GTCO’s share price fell 13.3% or N3.45 per share to close May 31, 2022 at N22.55 per share from N26.00 per share open for trading. The lender’s value on the NGX has depreciated by N101.5 billion over the past five months.

GTCO, in its Q1 2022 financial result, reported a profit of N43.21 billion, down 5.13% from the N45.55 billion reported in Q1 2021.

The holding company also reported earnings per share of 1.51 naira, down 5.63% from the 1.60 naira recorded a year earlier in 2021.

Apart from GTCO, the value of Stanbic IBTC Holdings also depreciated by N32.39 billion in five months when its share price depreciated by 6.9% or N2.50 per share to 33, 50 naira per share against 36.00 naira, it started trading this year.

Stanbic IBTC in its Q1 2022 financial result revealed a profit of N15.07 billion, an increase of 33.87% year-on-year.

The bank also reported earnings per share of N1.11, up 35.37% from the N0.82 reported a year earlier in 2021.

In the first quarter of 2021, the bank’s profit was reduced by 45% compared to the first quarter of 2020, still reeling from the impact of the pandemic and its adverse effects on businesses. However, in the first quarter of 2022, we can see the bank’s profit starting to recover.

“Stanbic IBTC shareholders last week approved an N2.00 dividend payment and its impact on the stock price of financial institutions on the stock exchange,” said PAC Holdings analyst Mr. Wole Adeyeye.

However, Wema Bank in the five months of 2022 earned N102.99 billion in five months against the backdrop of N2.67 per share or a 370.8% gain in its share price.

In his comments, Chief Operating Officer of InvestData Consulting Limited, Mr. Ambrose Omordion, noted that weak corporate earnings were forcing investors to divest from other fundamental stocks in the stock market.

According to him, “Most of the NGX-listed banks struggled in their Q1 2022 results. However, with the CBN raising interest rates, banks will definitely benefit and it will impact interest margin in the next quarter.

“Most Nigerian bank stocks are undervalued relative to African bank stocks. Once the profits of Nigerian banks improve, they will attract domestic and foreign investors. The outflow of foreign investors has also led to a decline in bank stocks on the stock exchange, as they have played a vital role in driving prices. Foreign investors gamble in bank stocks where their investment is protected by regulators.

He added: “GTCO is down due to declining corporate earnings coupled with foreign investors taking profits.”

Analysts at Coronation Research, in their latest report, “Nigerian Banks: Q1 22 Earnings Review,” said: “The narrative that banking sector fundamentals are compelling has persisted, even as investor apathy towards In our view, although bank margins and profitability have declined slightly in recent years, bank stocks have been oversold.

“In an environment where negative inflation-adjusted yields remain the theme, bank dividends continue to offer more attractive yields than Treasuries. Additionally, with yields rising, we believe fiscal 2120 may have been the lowest in terms of bank profitability.”

Financial Derivatives Company (FDC) analysts said in a presentation that Nigerian equities will remain popular among investors as yields in the fixed income sector decline and inflation continues its upward trend.

The analysts, in their March breakfast presentation at the Lagos Business School, said investors would buy fundamentally sound stocks with attractive valuations in a post-election year.

On the other hand, they see the stock market susceptible to economic and political vulnerabilities, although they expect the rising cost of borrowing to further reduce the profitability of listed companies.

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