The enormous headwinds facing Nigerian banks have exposed them to high volatility in earnings and price performance, in this high risk environment of uncertainties in the financial sector and the economy at large as dwindling oil price has affected the government revenue and financial providers of this oil sector.
It is not certain how much this has affected the banks, but the banking and investing community remain skeptical, seeking to know the best and worst banks among the pack.
They are presented in this report with respect to the latest September 2015 data and the price action of the banks. Investors should become more discerning about where to invest their funds profitably in 2016 as we expect this economic slowdown to linger, in the absence of visible concrete efforts and a strategic economic blueprint to reverse the present trend.
WORST BANKS
WEMA BANK
Market Cap: N34.35 Billion; Net Assets: N45.07 Billion
Current PE ratio: 8.81x; Price/Book value: 0.76
Dividend Yield: nil %; ROE: 2.88%.
Wema Bank, over the years have been relatively side-trending with multiple tops and bottoms to recently break down the first strongest support level of 0.90 kobo. The seeming price ranging of the bank is a reflection of its performance for these periods as the age of the bank, restructuring and repositioning have not shown much on its numbers to support price. The bank has broken down its support level of 90 kobo, market sentiments in the next trading sessions will determine how far the downside trend would go, especially at this period when the investing community is not expecting dividend payment from the bank due to its negative retained earnings.
FCMB HOLDINGS
Market Cap: N14.04 Billion; Net Assets: N158.36 Billion
Current PE ratio: 2.51x; Price/Book value: 0.09
Dividend Yield: 35.21 %; ROE: 1.18%
Since 2014 till date, FCMB Holdings’ share price has been on steady decline and now it appears that the stock is heading to a lower low level of its par value of 50 kobo or below. The down trending does not appear to be forming base which could mark a turning point in the fortune of the share price. It is expected that its shares would bounce back from a wider recovery throughout 2016.
STERLING BANK
Market Cap: N46.93 Billion, Net Assets: N704.35 Billion
Current PE ratio: 2.07x, Price/Book value: 0.07
Dividend Yield: 3.68 %, ROE: 1.07%,
Sterling Bank has been relatively stable before trending down to hit lower lows of N1.60 for the past two years. It rebounded on the January 27, 2016 and later gave way to the current trend forming a descending triangle pattern that is equally a reversal and continuation, depending on market sentiment or positive market forces. This trend can only reverse during this season, if the bank, at the end of the day, is able to pay shareholders dividend.
UNION BANK OF NIGERIA (UBN)
Market Cap: N94.16 Billion, Net Assets: N233.14 Billion
Current PE ratio: 3.36x, Price/Book value: 0.40
Dividend Yield: nil %, ROE: 4.00%,
In the last two years the stock has a mixed price action that was trendy in 2014 before down trending to recently form a symmetrical triangle pattern that signal reversal or continuation at the same time. An uptrend reversal is slim at this point and at the same time, there is the likelihood of a break down to continue the downtrend, which is highly dependent on the market sentiment especially now that the bank’s full year earnings is expected in the market and the possibility of dividend reward is zero, due to the negative retained earnings position of the bank.
SKYE BANK
Market Cap: N13.60 Billion, Net Assets: N145.15 Billion
Current PE ratio: 0.38x, Price/Book value: 0.09
Dividend Yield: nil %, ROE: 8.26%,
Skye Bank has followed the market to trend downward making lower lows despite the acquisition of mainstream Bank that is expected to boost performance but is yet to reflect on its numbers to support price. The bank’s infractions here and there have always projected its image as unserious institution before the investing community, irrespective of dividend in form of cash or bonus shares.
The stock remains bearish, touching new low of 96 kobo before reversing to form the current descending triangle which is a reversal or continuation chart pattern. The possibility of break out is slim as positive investors sentiment to drive would be low since the likelihood of dividend payment from the expected full year result is equally slim considering the headwinds in the industry and cost of infusing the two banks together.
DIAMOND BANK
Market Cap: N35.44 Billion, Net Assets: N224.16 Billion
Current PE ratio: 0.76x, Price/Book value: 0.33
Dividend Yield: 6.54 %, ROE: 7.11%,
Diamond Bank from 2014 till date has clearly been affected by the fears of a slowdown in the economy and the general market. The share price have been on steady decline and now appears to have found some support at the 2016 lows of N1.36. It appears to have found some consolidation on the charts, as it forms cup and handle, looking at things from a daily perspective. The base forming could mark a turning point in the fortune of the share price. It has done a lot of cost cutting over the last few years and has positioned itself well for a recovery with strong IT banking products. It is expected that the bank’s share price would bounce back from a wider recovery throughout 2016, if the economy improves.
FBN Holdings
Market Cap: N125.63 Billion, Net Assets: N576.65 Billion
Current PE ratio: 0.83x, Price/Book value: 0.22
Dividend Yield: 2.86 %, ROE: 8.72%,
2014 till date has been years shareholders of the bank would not forget easily as their investment were eroded due to steady decline in the bank’s share price which has not signaled any form of reversal due to falling fundamental of the bank that could not support the price. The recent profit warning that the expected result will be lower compared to the previous year has confirmed the fear among the investing public that trigger the dumping of the group share. It appears to be no consolidation on the charts, certainly looking at things from a daily perspective. It is expected that the share price would bounce back from a wider recovery throughout 2016 if its strategic risk policy is reviewed to navigate in harsh environment to boost performance and turn the fortune of the bank again to rebuild investors’ confidence in the bank.
UNITY BANK
Market Cap: N7.36 Billion, Net Assets: N86.12 Billion
Current PE ratio: 0.26x, Price/Book value: 0.09
Dividend Yield: nil %, ROE: 10.81%,
This bank for a long time have been struggling with performance that will drive its share price with enlarged share issue, which was reconstructed in April 2015 at share price of N5, since then the bank’s price action has been on the down trend due to weak earnings power to support the price still making lower lows towards the price before the reconstruction, meaning multiple loss for the investors. The reversal of the bank share price is not insight at this season since the investing community are not expecting any form of dividend due to negative retained earning position of the bank.
Note
Traders and investors should trade cautiously on these stocks and any position should be for long term with gaze on the numbers emanating from the banks to guide your stay. Invest wisely.