Even with many Nigerian institutions already grappling with a difficult regulatory environment prior to the Covid-19 pandemic, Renaissance Capital Analyst, Soji Solanke, holds that some of the most compelling stock picks lie in the banking sector. These stocks include:
Guaranty Trust Bank (GTB)
The analyst believes the bank is a quality name that has sold off more than warranted. Some of the reasons he cited include the fact that the bank has the highest RoE in the Nigerian banking landscape, the highest breakeven cost of risk buffer, as well as the largest net long FX position, placing the bank in a good position to benefit from a naira devaluation. Also, the company’s diversification into the fast-growing payments space makes it a good opportunity to leverage for growth.
A formidable name in the banking sector, Zenith Bank is expected to perform well in a quick recovery scenario as a result of its highly liquid balance sheet, the fact that it pays dividends consistently, as well as its high stock liquidity in the markets.
Another bank expected to be able to withstand a protracted slowdown is Stanbic IBTC and this is as a result of its diversified business model largely due to its large asset management business – the largest in Nigeria. According to the analyst, it makes the company’s earnings somewhat more defensive compared to its peers.
In FMCG, Nestle emerged tops as well:
The company’s SSA consumer analyst, Dayo Ayeni, believes Nestle Nigeria is compelling, also as a result of its strong balance sheet, its resilience, quality management; and its three strong brands, Maggi, Milo and Golden Morn.
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As at 28th May 2020, before markets opened, the share prices of GTB, Zenith Bank, Stanbic IBTC, and Nestle Nigeria are N24.85, N17.90, N35.80, and N995, respectively.