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Why Nigerian top bank stocks are too cheap to ignore?

Investors are advised to take advantage of the present low prices of banking stocks based on their 2019 financial results, and the dividend yield some of the tier-1 banks have declared.

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Stock market gains N110.7 billion on Friday trade session , Investors lose N153.6 billion on Monday as ASI dip 1.05% , Top Nigerian stocks, too cheap to ignore, Nigeria bourse crash analysis, Nigerian bourse loses N2 trillion in value in Q1 2020, as oil plunged 65% QOQ

The Nigerian Stock Exchange (NSE) has continued its bearish trend this week with the market capitalization shedding more than N1.2 trillion in three days. This could be attributed to negative sentiments like falling oil prices, fear of the naira being devalued.

These negative fundamentals have affected Nigeria’s most profitable sector to date in the market, banking sectors, The sector alone shed over 13% between Monday and Tuesday.

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Zenith Bank sets new date for dividend payout

Investors are advised to take advantage of the present low prices of banking stocks, especially based on their 2019 financial results, and the dividend yield some of the tier-1 banks have declared. For instance, Zenith Bank declared a dividend yield of 21.46% and Guaranty Trust Bank with a dividend yield of 14.04% as at 10th March 2020

The fact remains that the banking sector, which has over the years been the most liquid sector in the Nigerian stock market, has come under significant swinging of its price recently.

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[READ MORE: Global stocks tumble on “Corona” sell off)

It’s also stated that based on recently released financial statements by the Nigerian banks, the fact remains that a high number of listed banking stocks on the Nigerian stock market have the potentials to reward investors with solid returns, as they remain fundamentally good and expected to withstand the current unfavourable economic climate this year.

GTBank declares dividend payment for FY 2019

GTBank declares dividend payment for FY 2019

Where they stand: Taking a look at Nigeria’s tier-1 banks, which include Guaranty Trust Bank N19.90 ▼0.25%, Zenith Bank N12.05 ▼7.66%, Access Bank N6.45 ▼6.52%, United Bank of Africa (UBA) N6.20 ▲9.60% and First Bank Nigeria Limited N4.40 ►0% are greatly undervalued based on their price to book ratio standing at 0.8717, 0.4354, 0.4012, 0.3340 and 0.2516 respectively (value less than 1 shows its undervalued) as at March 10th, 2020.

Despite the huge sell-off witnessed lately this week, the fact remains that a significant number of banking stocks listed in the market still have the potential to reward investors with weighty returns.

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For instance, as at March 10, the earnings per share (EPS) of Guaranty Trust Bank (N19.95) stands at 6.97; Zenith Bank stands at 6.65; Access Bank stands at 3.04; United Bank of Africa (UBA) stands at 2.52, and First Bank stands at 1.44 (A higher EPS indicates more value because investors will pay more for a company with higher profits).

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In addition, market leaders among the Tier one and Tier two banks will continue to remain attractive at current market prices as dividend yield are now in the double digits as well as significant potentials in the medium to long term.

[READ ALSO: Stocks close February in deep red as investment options dry up for Nigerians)

Nigeria has over 40 million people without access to bank accounts – Access Bank 

Although the tight monetary policies of the Central Bank of Nigeria (CBN) have continued to pummel the sector with a multiplier effect on the equities market as banks have been told to focus more on providing loans and advances to small businesses by the apex regulator. CBN also warned the financial institutions to keep their non-performing loans (NPLs) under check, to guard against eroding income that could peg their upward movement.

It should be noted that the Nigerian equities market is currently selling at a discount that offers high upside potentials for investors to position for short to long-term capital appreciation.

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In a telephone interview with Nairametrics, Head, Capital Market, TRW Stockbrokers, Abdul Rasheed Momoh,  said that most banking stocks were trading at a discount that offered the best time for investors to start buying.

Olumide Adesina a French-born Nigerian, is an Investment Professional at Nairametrics Financial Advocates, owners of Nairametrics.com. Olumide Adesina is a certified Investment trader, with more than 14 years of working experience. His work experience covers trading commodity derivatives and analysis of global equities, currencies, commodities, cryptocurrencies, and Fixed Income instruments. A member of the Chartered Financial Analyst Society. You can follow Olumide on twitter @tokunboadesina and email via olumide.adesina@nairametrics.com.

1 Comment

1 Comment

  1. Airuero Adrian Aibangbee

    March 12, 2020 at 1:34 pm

    Excellent insight.

    Actually had this discussion today.

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Business News

Job listings spike up by 183% in April –Jobberman

Jobberman released figures showing a 183% increase in job listings on its platform in April 2020, thanks to its #UnityInAdversity campaign.

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Job listings spike up by 183% in April – Jobberman

Notable job placement website, Jobberman, has released figures showing that there was a 183% increase in job listings on its platform in the month of April 2020.

This increase, according to Jobberman, is a result of the #UnityInAdversity campaign which allowed companies to post job listings and access Jobberman’s database of over 2.2 million professionals across Nigeria for free, rather than paying the usual fees. This was the company’s way of showing support to businesses and individuals, amid the economic challenges which resulted from the COVID-19 pandemic.

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According to the release from Jobberman, this campaign came at a cost to the company since it was trading off its revenue by offering for free, the same services which formed its major source of income.

“At the beginning of March, Jobberman Nigeria saw a 70 percent decrease in job listings due to the reduced economic activity caused by the enforced lockdown and many companies shutting down recruitment budgets to cut costs. Jobseeker sign-ups also decreased by 17 percent. Jobberman took the bold step to put employers’ and job seekers’ needs first” the statement read.

(READ MORE: Merger, Tax incentive boosts BUA Cement FY 2019 result)

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The campaign, which is billed to run till June 30, has paid off greatly as data for April’s job listings alone was more than that of the entire Q1 2020 period. See a breakdown of the job listings below:

  • Almost a fifth of the positions (18.79%) were listed in the tech sector
  • Banking, finance, and insurance accounted for 9.27%
  • Education and training had 6.78 percent
  • IT & Software positions accounted for 11.69%
  • Sales had 13.32%.

Note that with the increase in job listings, job seeker sign-ups also increased by 39% in April alone.

Job listings spike up by 183% in April – Jobberman

Speaking about the campaign, the CEO of Jobberman Nigeria, Hilda Kragha said, “The COVID-19 pandemic has made the process of connecting talent to opportunities more complicated and we are fully aware of the strain businesses and individuals in Nigeria are facing. We plan to be here for the next 10 years so making this small sacrifice to help our users navigate these difficult times is something that we think is definitely worth doing”.

Kragha also noted that the campaign has encouraged healthy competition as candidates strive to show themselves qualified for the position.

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“We have found that soft skills such as emotional intelligence, business etiquette, time management, which are often overlooked and underestimated in Nigeria, can make a big difference. We know the power of soft skills and we are committed to empowering individuals with the training and soft skills they need to succeed in the workplace” she explained further.

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(READ MORE: Partnerships Beyond The Partners… Another Lesson From Interswitch)

Sequel to this, the company also launched a free soft skills training programme to help job seekers (between age 18 and 30 years) acquire the needed soft skills and better their chances of gaining employment.

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Economy & Politics

Gold prices rise, as President Trump decides on China today

Gold prices jumped on Friday as China and America’s drift deepened over further moves by China to impose security laws on Hong Kong

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Gold, Gold prices tick up as President Trump decides on China today

Gold prices jumped on Friday as China and America’s drift deepened over further moves by China to impose security laws on Hong Kong, lifting the allure of safe havens amid market uncertainties.

U.S. President Donald Trump’s top economic adviser cautioned the Chinese lately that Hong Kong, which has enjoyed special privileges, may now be treated like China when it comes to financial matters and trade.

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Trump, who had earlier vowed a tough action on China, will hold a news conference today to announce what measures his administration will take.

Spot gold gained about 0.1% at $1,719.63 per ounce, and U.S. gold futures rose 0.4% to $1,734.60.

The friendship between the Americans and Chinese had weakened, since the outbreak of the Covid-19 pandemic.

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President Trump and President Jinping of China have accused each other as a result of issues surrounding the COVID-19 pandemic.

(READ MORE:  Gold records 3-week high, as investors rush to safe haven)

Why do Investors buy Gold? Global Investors most often buy the safe-haven asset in times of uncertainty and use it to hedge against cash (inflationary macros).

Oil prices, Gold prices tick up as President Trump decides on China today

“The possible U.S. response could range from a tearing up of the Phase 1 trade deal and fresh tariffs on China, to milder travel or financial sanctions on Chinese officials,” said Shane Oliver, chief economist at Australian wealth manager AMP to Reuters News.

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“It is seen as a major threat to the rally we’ve had and the recovery,” “If it’s at the relatively mild end, then I don’t think it would derail the recovery bull market, but if it’s at the more extreme end with tariffs and harsh treatment of Hong Kong, then I think it gets more problematic,” Oliver added.

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Business News

AfDB board denies asking Adesina to step down, as Obasanjo says the bank risks being hijacked

“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign.”

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AfDB partners DFID to unveil $80m infrastructure financing for Africa, ADB launches $3 billion “Fight COVID-19” Social Bond, US calls for an independent probe of AfDB president, Akinwumi Adesina, AfDB board denies asking Adesina to step down as Obasanjo says the bank risks being hijacked

The Bureau of the Board of Governors of the African Development Bank (AfDB) has denied media reports making the rounds that AfDB’s president, Akinwumi Adesina, has been asked to step down pending the completion of the probe and determination of allegations against him.

The bank’s top governing board members said that they have not asked Adesina to step down from his position as president, even as the board continues to review the fallout of complaints by some whistleblower. The statement from the Chairman of the bank’s board of governors, Niale Kaba, said:

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“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign. All governors will be carried along in resolving the issue.’’

READ ALSO: IMF advises banks to suspend dividend payment

Kaba also stressed that there was no governance crisis at AfDB as was being speculated in certain quarters. He confirmed that the Bureau of the Board of Governors of AfDB met on Tuesday, May 26, after the request by the U.S Secretary calling for an independent probe. The essence of the meeting was to take a closer look at the allegations by the whistleblowers against Akinwumi Adesina, said allegations which had already been investigated by the ethics committee of the bank.

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Kaba further disclosed that even though no decision has been taken yet, the bureau assures that it is treating the case with the utmost seriousness that it deserves.

(READ MORE:  AfDB bows to pressure from U.S, orders an independent probe of Akinwumi Adesina)

Adesina, who maintains his innocence of those allegations, had stated that a fair, transparent, and just process will vindicate him.

In a related development, former Nigerian President Olusegun Obasanjo had thrown his weight behind Adesina and kicked against the demand by the United States of America for a fresh, independent probe of the AfDB President who had earlier been cleared by the ethics committee of the bank.

In his letter to 12 former African Presidents, Obasanjo said that Africa must stand up and not allow its institutions to be unduly controlled by non-African countries.

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Obasanjo said that the bank has witnessed tremendous growth under Adesina’s leadership and has doubled its capital base since he took over.

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