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Sterling Bank has stepped up its game

Sterling Bank is our stock pick for this week.

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Sterling Bank, Adegoke

Sterling Bank which used to lag behind its peers in the banking industry, seems to have stepped up its game up this year. The bank has decided to focus its lending on 5 key sectors: “HEART” (Health, Education, Agriculture, Renewable Energy and Transport).

In addition, it has launched I-invest, an app that enables consumers to buy treasury bills themselves, and increased its social media presence.

Sterling Bank is our stock pick for this week.

About the bank

Sterling Bank Plc (formerly known as NAL Bank Plc) was the pioneer merchant bank in Nigeria. It was established on November 25, 1960, as a private limited liability company, and was converted to a public limited liability company in April 1992. The bank was listed on the Nigerian Stock Exchange (NSE) on August 17, 1993.

The current entity is a product of the 2006 merger among Indo Nigeria Merchant Bank (INMB), Magnum Trust Bank, NBM, and Trust Bank of Africa.

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Recent results

Results for the half year ended June 2018 show that interest income increased from N50 billion in 2017 to N62 billion in 2018. Profit before tax jumped from N4.3 billion in 2017 to N6.3 billion in 2018. Profit after tax jumped from N3.8 billion in 2017 to N6.2 billion in 2018.

Pricing

Current Share Price: N1.30
Year High: N2.42
Year Low: N1.13
Year to Date: 20.37%
One Year return: 26.55%

Price Outlook

Possibilities of a rally in the stock’s share price are quite low, as the Nigerian Stock Exchange has been in a bearish slump since the last few weeks. A year to date return of 20.37% means that the stock has outperformed the NSE, which is down year to date.

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 Valuation

Sterling Bank is currently trading at a price to earnings ratio of 3.39 times earnings, within the same range as its peers. FCMB is currently trading at a PE ratio of 2.9 times earnings. The stock is also trading far below the average price to earnings ratio on the NSE.

Outlook

For the banking sector, results have largely been flat year on year. Yields on treasury bills, which spiked last year, have fallen in tandem with the drop in inflation. Revaluation gains have all but disappeared due to a stable exchange rate, backed by robust foreign exchange reserves and a positive outlook for current oil prices.

Banks have also been reluctant to ramp up borrowing, due to the weak macroeconomic recovery. GDP figures for the most recent quarter ( three months ended March 2018) show that the economy grew by 1.95%.  While the rate was positive, it was a drop from the 2.11% recorded in the last quarter of 2017.

The rebound in the bank’s results have been largely due to increased earnings from fees and commissions, as well as electronic banking income and what seems to be a one-time gain in foreign exchange trading.

The bank expects the stable oil prices to lead to further repayments on oil and gas exposures, and improvements in asset quality. Oil and gas loans comprise 31% of the bank’s non-performing loans.

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The bank has also stepped up its social media presence, a strategy which should yield benefits if it remains consistent.

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Shareholders expecting a bumper dividend may have to temper their expectations, as the bank plans to raise additional capital within the year. Sterling paid a dividend of N0.02 for the 2017 financial year.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via [email protected]

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Cryptocurrency

Why Bitcoin still looks like a bargain

With prices exceeding $18,000 for the first time since 2017, BTC looks poised to break its previous all-time high.

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Bitcoin on high demand, hits 2-year high, trading $17,000

As stakeholders, players, and crypto wannabes ponder if increasing their stakes on the world’s most popular crypto seems ideal now, despite the fact that it’s trading near a record high, Nairametrics decided to weigh in on some key fundamentals showing Bitcoin looks like a bargain.

With prices exceeding $18,000 for the first time since 2017, BTC looks poised to break its previous all-time high. More investors are holding bitcoin for wealth preservation.

A recent report from Glassnode, revealed plummeting Bitcoin exchange balances support the narrative that investors intend to hold their flagship crypto more than ever before, taking into consideration that with the prevailing demand in play, and limited supply of Bitcoin, the price would most definitely go north.

Bitcoin liquidity continues its downward trajectory, buttressing that the macro bitcoin is becoming scarce for open sale.

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It is also important to note that Bitcoin has a circulating supply of 19 million coins and a max supply of 21 million coins, meaning there are about 2million left to be mined.

Taking into account that about 4 million Bitcoins have been lost forever as a result of BTCs owners dying, and their next of kin not having access to such cryptos, it is fair to say there are only about 15million BTC presently in circulation to cater for over 7 billion people fighting to have a stake in Bitcoins, meaning that as BTC becomes scarce and more popular, it becomes a matter of time that the crypto asset valuation will hit the roof.

Bottom line

It’s vital to consider the bias saying that as global financial regulators begin to implement their regulatory framework on cryptos, it could become a matter of months for global banks and multinationals to increase their buying pressures on Bitcoin. Thereby, pushing the price beyond the reach of an average investor.

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Cryptocurrency

28 million merchants to be granted crypto usage on PayPal

PayPal CEO, Mr. Schulman recently hinted the company will allow the usage of crypto funding for 28 million merchants.

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PayPal acquires shopping browser extension company for $4 billion

PayPal CEO, Mr. Schulman, recently hinted that the company would allow the usage of crypto funding for the 28 million merchants on its payments platform.

In a report credited to CNBC, the CEO of the payment juggernaut company elaborated further by saying, “Early next year, we’re going to allow cryptocurrencies to be a Funding Source for any transaction happening on all 28 million of our merchants and that will significantly bolster the utility of cryptocurrencies.”

The Chief Executive also disclosed that it was just a matter of time for digital currency to replace the old traditional forms of fiat currencies (paper money).

He said:

“As paper money slowly dissipates and disappears from how people are using transactions; Central banks, especially on the retail side, will need to replace paper money with forms of digital fiat currency.”

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What this means

About a month ago, Nairametrics reported on PayPal Holdings Inc’s announcement that it would provide its users the opportunity to buy, hold, and sell cryptos directly from their PayPal accounts by early 2021.

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It also hinted at a strategy to significantly boost its crypto’s utility capability, by making it readily available as a funding source for purchases with its 28 million clients globally.

In a press statement seen by Nairametrics, Dan Schulman, President and CEO, PayPal, gave key insights on why the global payment company was going crypto:

“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access, efficiency, speed, resilience of the payment system, and the ability for governments to disburse funds to citizens quickly.”

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Market Views

Tesla up 500% in 2020, near $500 billion market value

The tech powerhouse is now less than $6 billion short of approaching the $500 billion market value.

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Survey unveils Elon Musk as the most inspirational leader in tech 

Tesla, the electric car automaker, has gained 500% in 2020 and has become by far the world’s most valuable automaker in the world, despite it producing far less than Volkswagen, Toyota, or General Motors.

The tech powerhouse is now less than $6 billion short of approaching the $500 billion market value, and extending its surge since reports struck Wall Street on Tesla making its S&P 500 debut on December 21, forcing index funds to buy billions of dollars of its share.

Unsurprisingly, it became global investors’ choice amid its recent price action rising by 6% – showing a gain of over 6%. Tesla Inc. extended its rally at the most recent trading session ahead of its December debut in the S&P 500 (SPX), as it is now worth a market value of $494 billion.

Its market capitalization is higher than the Gross Domestic Product (GDP) of any African country, Nigeria – $448.1billion, South Africa – $351.4billion, Egypt – $303.2billion, Algeria – $169.98billion, Morocco – $118.7billion, Ethiopia – $96.12billion, Kenya – $95.5 billion, Angola – $94.6 billion, Ghana – $66.9 billion, Tanzania – $63.2 billion.

What you should know

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Now worth $494 billion, Tesla will increase the concentration of heavyweight companies within the S&P 500. It will be the 7th most valuable company within the index, just behind Berkshire Hathaway and ahead of Visa Inc., according to Refinitiv data.

  • About a fifth of the car company’s shares is owned by its Chief Executive, Elon Musk and other insiders.
  • The S&P 500 is weighted by the number of companies’ stocks available on the stock market.
  • The car company’s influence within the benchmark will be slightly reduced, putting it in 8 positions, just behind Johnson & Johnson, with an equivalent of about 1% of the S&P 500 index.

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