The Nigerian Banking Industry has been under intense pressure this year on the back of tightening regulations, increased cost of funds and shrinking margins. The sector has also mostly underperformed the All share index during the year with many of the stocks failing to sustain impressive capital gains for investors. This has made some people view the sector as one that is mostly undervalued and could provide an upside in the coming months if things were to change for them.
One way to check our for bargain (if there ever is one here) is to look at some of the stocks that are trading very close to their one year lows. Here is our list of underperformers this year.
UBA is a Tier 1 bank at the lower end of the Big 5. The bank’s latest half year results saw pre-tax profits drop 13% to N28.8billion. The banks deposits also dropped 8% to N1.9trillion compared to N2.1trillion at the end of 2013. The results has had a negative impact on the share price which currently trades at N6.78 and just 2% off its 12 months low. P.E ratio at that price is about 4.4x.
This is a Tier 2 bank that has had a rough ride over the last one year. Their half year result saw a 31% drop in pre-tax profits to N7.2billion compared to N10.5billion a year earlier. Customer deposits however rose 3.6% to N818billion during the year. Skye Bank shares is just 1% of its one year low at N2.69. Skye Bank has a one year high of N4.67
Sterling Bank, another tier 2 bank reported a flat pre-tax profits of N6.3billion for the first half of 2014. The company’s customer deposits was 2% lower at N556billion as at June 2014. Return on average equity was a dismal 1.5% indicating how poor they have been able to generate returns for shareholders. The share price is currently N2.16 and 3% off its one year low.
Fidelity Bank recently saw its former MD become Governor of Anambra State. However, the governor did not leave the bank as good enough a shape as one might expect. The bank at the end of 2013 reported a 57% drop in profit after tax to N7.7billion. They reported a 16% drop in pre-tax profits to N9.4billion in the first half of 2013. The tier 2 bank’s share price has also underperformed currently trading at N1.95 5% off its one year low of N1.85. Fidelity Bank has a one year high of N2.95
Wema Bank Current price 90kobo – 1% off Year low
Unity Bank – 50kobo – Flat