Banks Valuations Sink as Investors Take Early Exits


Nigerian big balance sheet banks see their respective stock market valuations decline last week as equity investors take early exits ahead of dividend announcements.

The market still awaits the earnings release of Access Bank and FBN Holding Plc for the financial year 2021.

Stock analysts said that there will be re-entry as investors could take back seats to gauge market temperature, track earnings and dividend direction among other things.

“For each result, investors could sense what would happen next and trade according to the pattern: sometimes, it is good to exit to make a strategic re-entry”, gathered from Broadstreet geeks.

A slew of equity analysts at the Broadstreet consensus is that banks’ share prices are underpriced, and expect the stock market to reward robust earnings performances of key industry players.

Unfortunately, investors are only enjoying streams of dividend payments that are almost always dotted by weak naira, and higher headline inflation without reasonable capital appreciation.

Last week, amidst earnings releases; which signals that Nigerian top lenders are now defending their earnings position, share prices of Tier-1 banks declined further.

As of Friday’s close, equity investors at the Nigerian Exchange were willing to pay N2.642 trillion to buy all the Tier-1 Banks after their respective share prices dropped. Despite year on year earnings improvements, the market has refused to reprice the tier-1 lenders’ valuation upward. See: Nigeria’s Tier-1 Banks Market Valuation Hits N2.6 Trillion

In dollar terms, this translates to $6.44 billion at the exchange rate of N410. Data tracked from the Nigerian Exchange shows that Zenith bank Plc, the largest lender by market valuation shed 1.86%.

Access Bank Plc, the largest by total asset lost 1.93%. FBN Holdings, the oldest dropped off 2.60%. GTCO, the industry’s cost leader, fell by 3.30% and UBA was priced down by 5.17%

At the end of the week, equity investors at the local bourse valued Zenith bank at N830.437 billion on 31.396 billion outstanding shares priced at N26.45 per unit.

Access Bank worth N360.784 billion to equity investors in the local bourse, priced at N10.15 per unit on 35.545 billion outstanding shares. FBN Holdings which recently experienced a price surge following massive investment by its competing single largest shareholders now worth N403.822 billion, traded at N11.25 per unit on 35.895 billion outstanding shares.

Guaranty Trust Holding Company, a Tier-1 lender that gave up top market valuation position to its immediate rival now worth N765.210 billion. The financial service holding company’s ended the week at N26 per unit on 29.431 billion outstanding shares. 

Pan-African lender, United Bank for Africa (UBA) appears to be the least valuable in the Tier-1 category at the moment with a N282.145 billion valuation. The bank share price ended the week at N8.25 on the group’s 34.199 billion shares outstanding.

Based on their respective market valuations, Zenith is the most valuable lender in the banking sector followed by GTCO, FBN Holdings, Access Bank and then UBA Plc.