reports
- Ayodeji Dawodu
- Christopher Dielmann CFA
- Olabisi Ayodeji
- Rahul Shah CFA
Nigeria banks: MPC recommends restriction on banks’ government treas...
The Governor of the Central Bank of Nigeria (CBN) announced that a limit on banks’ government securities holdings may be introduced to further incentivise lending to the real sector, at the Monetary Policy Committee (MPC) meeting briefing on 21 May. Improved credit delivery to the real economy is expected to enhance economic output, hence the MPC has urged banks to increase lending via its proposal to the CBN. The CBN is yet to confirm if the proposal will be adopted or disclose details of a p...
- Ayodeji Dawodu
- Olabisi Ayodeji
- Rahul Shah CFA
Guaranty Trust Bank: Better-than-expected results; reiterate Buy
Q1 19 EPS rose 10% yoy to NGN1.74 and ROA improved by 0.5ppts to 5.7%, tracking ahead of our full-year forecasts of NGN6.12 and 5.0%. A positive surprise was the NGN6.1bn in ‘recoveries and others’ reported under ‘other income’, which more than accounted for the yoy increase in the bottom line. There was also a surprising 92% increase in credit-related fees yoy, despite weaker loan volumes. The unexpected 76% spike in AMCON charges came as a major negative surprise, which kept the cost/i...
- Olabisi Ayodeji
Nigeria Banks: Retail opportunities driving a focus on transactions
We raise our TPs and reiterate our positive view on Nigerian banks as we explore electronic banking income, which is becoming an increasingly important share of their revenue base. With rising adoption of technology, we expect further efficiency gains, and see scope for a reduction in the cost of deposits as financial-inclusion rates rise.
- Olabisi Ayodeji
Tier 1 Nigeria banks: Approaching dividend season, Buy Zenith, UBA & G...
Tier 1 Nigerian banks offer the highest dividend yield in our frontier coverage, at 9.6% for FY18f vs 4.2% for frontier peers. In our view this reflects their stronger profitability (ROE of 16.2% vs 14.1% for frontier) and higher payout ratio than peers (43% vs 36%). The recent weak share price performance of the Tier 1 Nigeria banks’ has further accentuated the dividend yield variance; the Tier 1 banks are down 30% in the last 12 months (in US$) vs a 3% decline for our frontier banks universe...
- Ayodeji Dawodu
- Olabisi Ayodeji
- Rahul Shah CFA
- Tolu Alamutu CFA
- Olabisi Ayodeji
Nigeria Banks: No sparks in the medium term, but valuation is overly d...
Nigeria banks remain attractive, with the sector down 9% ytd as a result of the recent sell-off, which was primarily caused by cautious investor sentiment. The sector currently trades at FY 19f PB and PE of 1.3x and 4.6x, respectively, compared with frontier peers at 1.6x and 10.3x. We have Buy ratings across the Nigeria Tier 1 banks, and also see opportunity in Stanbic IBTC within Tier 2.
GUARANTY TRUST BANK PLC 9M'18 - Another decent quarter sees earnings t...
Another decent quarter sees earnings track estimates GUARANTY released its 9M’18 results, posting another set of impressive numbers. Although Q3’18 standalone performance was relatively weaker q/q, bottom line for the 9M period still came in impressive, up 13% y/y and 2% better than our estimate. Whilst top line came in mildly below our estimate - ₦337 billion vs...
- Olabisi Ayodeji
Guaranty Trust Bank: Another strong quarter, reiterate Buy
Q3 earnings rose by 14% yoy to NGN47.6bn. Key tailwinds were strong non-interest revenue growth (up 167% yoy) and the impact of a NGN0.3bn write-back (versus a NGN1.1bn impairment in Q3 17). On the downside, net interest income continued to fall on weaker loan volumes and asset yields, and there were increases across the key operating expense lines.
- Tolu Alamutu CFA
- Olabisi Ayodeji
Nigeria Tier-1 Banks: Sector valuation is overly discounted – Buy
We now have Buys on all five Tier 1 banks in Nigeria. We upgrade our recommendation on FBNH and Access to Buy (from Hold) following recent price weakness, while leaving our TPs unchanged. Our top picks are UBA (given its attractive regional diversification), GTB (best-in class cost efficiency and long US$ position), and Zenith (relatively strong profitability and capital ratios).
- Tolu Alamutu CFA
- Olabisi Ayodeji
GUARANTY TRUST BANK: Q2 18 – earnings impress again, upgrade to BUY
At FY18f P/B of 1.8x, GTB trades at a premium to peers, and we think this is justified by its strong profitability profile, high efficiency across key cost lines, and robust net long US$ position. With the stock down 12% in the past three months, we now find valuation more attractive, particularly in the context of a respectable H1 18 performance.
The Market Today - 09 August 2018
Dangote Refinery to generate 12,000mw from LNG According to media reports, Dangote refinery is expected to have a 650,000 b/pd crude oil refining capacity (31% of Nigeria’s current average daily production) as well as sufficient gas supply to support as much as 12,000MW of power generation. Group Executive Director, Devakumar Edwin, in an interview also stated that the largest ever sub-sea pipeline, with a length of 1,100km, is being built...
- Rahul Shah CFA
Nigeria Banks: Notes from the field – reasons to be positive
On our recent trip to Lagos we met with six of the Nigerian banks; we present the key topics of discussion in the note. We cover macro in more detail on pages 2-3 and banking sector themes on pages 3-5. Our favoured names in the sector are Zenith (Buy, TP NGN31.50) and UBA (Buy, TP NGN12.00). Both names generate high ROE (17-20%) and trade at attractive multiples (
Guaranty Trust Bank: Q1 18 in line – winning earnings run continues,...
Quality of earnings justifies measured growth. Guaranty Trust Bank (GTB) started the year on a positive note, with pre-tax profit up 4.4% to NGN52.6bn, in line with both our full-year estimate of NGN201.3bn and management’s guidance of NGN205bn on a run-rate basis. BVPS was down 2.5% YoY to NGN18.6 (vs FY18f NGN24.1) and annualised ROE increased by 70bp yoy to 31.2% (vs FY18f 26.0%). Modest growth in earnings due to lower provisions charge and higher FX-related income helped offset the decline...
- Tolu Alamutu CFA
GT BANK: Solid start to the year
We are keeping our Buy recommendation on the GT Bank 2018 bond. We acknowledge that this bond is unlikely to drive investors' returns this year, given the short time to maturity. However, it remains the only way to gain exposure to this best-in-class bank. Q1 2018 net income of almost NGN45bn was up from NGN41bn a year ago. The ROE was over 30%. GT Bank’s solid bottom line reflects strong non-interest revenues, lower provisions and a lower tax charge. Capital ratios remain high even after the ...
- Tolu Alamutu CFA
Guaranty Trust Bank: Yet another stellar performance, HOLD
HOLD for defensive protection. At FY18f P/BVPS of 2.2x vs TP/BVPS of 2.0x, GTB is trading at close to fair value, in our view. However, the bank maintains strong capital ratios and a nimble risk profile, alongside a solid track record of best-in-class returns (>25% ROE). In our view this qualifies it as a core defensive holding in any portfolio of Nigeria stocks, even through a less-than-perfect macro context. Medium-term earnings growth for the bank should remain strong, albeit at a slower pac...
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