Business
Bank stocks tumble despite soaring profits
- Investors jittery as top brands trade below nominal value
By JULIUS ALAGBE
This season may not be the best for most top banks in the country as their improved profitability is being discounted in the share prices on the stock market, which is unusually, as earnings and profitability are critical indicators of positive price rally. This possibly shows that the bearish run in the market is deeper and beyond the market sentiments and indicators.
Top banks in the market have been posting impressive results over time but are trading at far below par, which is troubling to both the banks and other market operators. Average non-performing loans in the banking sector has nosedived to 9.3% at the end of first half, thereby raising assets quality of the deposit money banks but analysts said the stock market has failed to reward banks’ chief executives’ performance.
In their respective earnings releases for the 9 months in the financial year 2019, analysts see quality assets allocations which supported Tier-I banks impressive performances. However, the big balance sheet lenders stocks’ performance has been largely disappointing, save for Access bank Group whose stock returns positive year to date.
Analysts at Meristem Securities in a note stated that market performance depends largely on the economic condition. It further stressed that earnings release would mean less to the market if economic pulse is weak.
Mr. Jide Famodun, a finance expert with LSintelligence said: “If you look at recent stock market report, you would notice significant number of Nigerians don’t go near investment in stocks. This is partly due to poor financial education or literacy and inability of market to absorb good news into pricing among other issues”.
“You know, banks are outperforming the economy, and market knows how to make adjustment when macroeconomic condition is strapped, Famodun added.
Despite macroeconomic headwinds, Tier I banks combined gross earnings for the 9 months in financial year 2019 hit about N2.162 trillion. The elevated earnings represents a 2% increase when compare to about N2.125 trillion made in the comparable period in 2018.
Meanwhile, from the beginning of the year to date, the top banks share prices have been slashed, except for Access Bank Plc, the only stock in the money that has maintained a rally.
BusinessHallmark analysis revealed that Access Bank Plc share price has increased by 14.62% year to date as it closed at N7.45 kobo on Friday. The share price of the bank opened the year at N6.80 before it hit its peak point at N7.70 then dropped to the lowest price at N5.30. At the close of trading session, investors priced Access Bank Plc at N264.811 billion on outstanding share of 35,545,225,622 units.
Zenith Bank Plc has lost 26.25% of its share price year to date. At the beginning of the year, the market placed N23.05 on the bank’s share. The stock hit the peak price in the year at N26, and then lowest price was N16.20. As at Friday, investors think the share price worth N17 kobo.
At the close of trading session, investors priced Zenith Bank Plc at N533.740 billion on outstanding share of 31,396,493,786 units. Meanwhile, at its peak price, the Group’s market worth was N816.308 billion.
FBNH has lost 34.38% of its opening share price of N7.95, hit the supply point as the stock plunged to N4.50 while peak point in the year was when the share traded at N8.45. FBNH share traded at N5.25 on Friday. At the close of trading session, investors priced FBNH Plc for N188.45 billion on outstanding share of 35,895,292,792 units. Meanwhile, at its peak price, the holdings market worth was N303.315 billion.
UBA Plc also have negative return year to date at the current price of N5.75 to a share. In the beginning of the year, the share price opened the floor at N7.70, reached the year high at N8.20 then and dropped to lowest at N5.50. The share has depreciated by 25.64% against the opening value.
At the close of trading session, investors priced UBA at N198.356 billion on outstanding share of 34,199,421,368 units. Meanwhile, at its peak price, the Pan Africa bank market worth was N280.435 billion.
GTBank share price has also lost significant value. Year to date, the bank share price has lost 27.87% of its opening value. In January, investors valued the bank’s share at N34.45 but as at Friday, it traded at N24.9 kobo. At its peak, it was traded at N38.95 before it dropped to lowest in the year at N25.75 to a share.
At the close of trading session, investors priced GTB Plc for N732.836 billion on outstanding share of 29,431,179,224 units. Meanwhile, at its peak price, it market worth was N1.146 trillion. In their individual results for the 9 months of the financial year 2019, GTBank gross earnings pitched at N326.144 billion, which represents a 3% decline from N334.72 billion the bank achieved in the comparable period in 2018.
However, the bank raised profitability despite the fact that revenues nosedived. Its profit after tax settled at N146.99 billion, a 3% uptick when compare with N142.224 billion in similar period in 2018.
Zenith Plc.’s gross earnings increased by 3.5% from N474.61 billion to N491.268 billion at the end of 9 months in the financial year 2019. The results show that the bank profit after tax also followed the same trend. Post tax profit expanded 4.5% year on year to N150.7 billion. In the comparable period in 2018, Zenith Bank had raked in N144.2 billion.
UBA Plc increased gross earnings by a whopping 13.6% from N357.1 billion in September 2018 to N405.5 billion a year after. Meanwhile, at the bottom line, UBA profit after tax surged 32.3% from N61.6 billion to N81.6 billion due to lower impairment charge on credit losses booked in the period.
Also, FBNH gross earnings closed the period at N426.2 billion, having dropped marginally from N430.8 billion in the comparable period. At N51.7 billion, its profit after tax jerked up by 15.3% from N44.9 billion level attained in 2018.
Access Bank’s gross earnings berthed at N513.655 billion at the end of 9 months period in financial year 2019. This represents 3% decline when compare to N528.744 billion the bank made in 2018. Profit after tax however expanded by 44.23% from N62.911 billion to N90.739 billion in the period under review.
However, analysts said that the weak macroeconomic condition in the country dims investors’ sentiment. Therefore, bears have overstayed in the stock market in the year with unintended consequences of the government policies.
In the Tier 2 class, smaller size banks have exhibited mixed results. While some have returned positive, others have had their share priced depreciated. We hope to see market rebounds on the back of projected improvement in the economic growth down the year, analysts said.
