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Analysts expect banks to record strong performances

By on August 25, 2015

Contrary to expectations that regulatory and economic headwinds will hit banks hard this year by stifling their performance, there are strong indications that 2015 will end on a positive note for most banks.

Several banks have reported positive performance for the first and second quarters of the year, and analysts believe the trend is likely to be sustained.

In October last year, ratings agency Fitch Ratings had said that actions aimed at protecting the economy and the banking system by the Central Bank of Nigeria would make the profits of Deposit Money Banks in the country drop this year.

While recalling that some of the regulatory headwinds had led to weaker profitability and “stemmed credit growth” in the first half of 2014, the rating agency said Nigerian banks’ assets growth and earnings would experience further fall over the next 18 months.

Fitch had, however, observed that the nation’s banks were performing well despite the twin hurdles of tight monetary policy actions and new banking rules.

But there were also reports of significant increase in banks’ non-performing loans, another factor expected to affect their performance.

Analysts at Meristem Securities Limited, in their investment guide for this week, said the banks were likely to end the year with “fairly strong performances”.

They said, “The recent earnings releases have been fairly good, and while we expect the financial performances of most banks will taper off as we go towards full-year 2015, we believe that a few banks will still report fairly strong FY performances, and declare attractive dividend disbursements.”

Last week, Guaranty Trust Bank Plc, Access Bank Plc and Sterling Bank Plc released their half-year 2015 results, with all the three banks reporting growth in earnings and profits. Access and GTB also declared interim dividends.

Reviewing the performance of the banks, the Meristem analysts said the results were generally good, as all the banks recorded both top- and bottom-line growth.

They observed that Access bank recorded gross earnings, earnings-before-taxes and earnings-after-taxes growths of 43 per cent, 44 per cent, and 39 per cent year on year, respectively. The bank also declared an interim dividend of NGN0.25 per share, implying a dividend yield of 5.33 per cent, based on Friday’s closing price of N4.69.

On its part, Sterling Bank’s result showed gross earnings, profit-before-tax and profit-after-tax growths of 12 per cent, one per cent, and seven per cent, respectively, compared to last year.

As for GTB, the analysts said it “maintained its impressive 2015 performance, after the bank recorded YoY gross earnings, PBT, and PAT growths of 15 per cent, 21 per cent, and 21 per cent, respectively.”

The bank also declared an interim dividend of 25 kobo per share, which according to the analysts, implies a yield of 1.14 per cent, based on Friday’s closing price of N22.

The analysts, however, observed that the week was largely negative for banking stocks as only two stocks recorded positive returns.

“Access and Sterling Bank appreciated in value, gaining 7.82 per cent and 5.29 per cent accordingly, while the top decliners for the week included FBN Holding Plc (-11.35 per cent), Wema Bank Plc (-11.11 per cent), FCMB Group Plc (-10.93 per cent) and Diamond Bank (-10.18 per cent).”

In the agriculture sector where there was no gainer last week, with two stocks declining and three others trading flat, the Meristem analysts said they expected bargain-hunting activities on the sector stocks in the coming week owing to the relatively low prices at which most of the sector’s counters were currently trading.

 

[Punch]