Analyst names three banking stocks to watch

AS performance continued to be positive at the Nigerian Stock Exchange (NSE), a top research and investment analyst have mentioned three banks to be wary of when the tide turns and stocks start heading south.

Performance of the local bourse was largely positive last week as the All Share Index (ASI) gained 5.1pet cent Week on Week (W-o-W) with the index settling at a 9-year high of 45,092.83 points while Year to Date (YTD) return advanced to 17.9per cent. Investors gained N785.9billion in value as market capitalization accelerated to N16.2trillion.

Africa Dialectic Analyst, Jude Fejokwu in his analysis of banking stock performance seen by Nigerian Tribune, and made available to investors said:

“I will mention (briefly) three banks to be wary of when the tide turns and stocks start heading south as investors panic and seek for the exit trying to hold on to their unrealized gains.”

According to the financial expert, the nine-month (September 2017) result of First City Monument Bank (FCMB) is not on the Nigerian Stock Exchange’s corporate disclosures page.

This he alleged, is because pre-tax income declined by 52per cent year-on-year and Gross Earnings declined by 16per cent year-on-year.

Pre-tax income was N7.57 Billion in April 2007 (12-month result) and ten years later now operating as a holding company, nine-month pre-tax income in September 2017 is N6.84 Billion despite interest income being approximately seven times larger in September 2017 compared to April 2007.

For Skye Bank, he said no 2016 fiscal year result has been released while 2017 fiscal year results are about a month away from release by every other bank.  The analyst believes that “No news is not good news…,” adding, “Remember when Oando delayed its result for almost a year? “

The Stanbic IBTC is a holding company that incorporates the largest asset management company in Nigeria.  Nonetheless, this bank’s gross earnings and assets are less than that of Diamond Bank while trading 12.5X higher per share.

“Almost the entire free float is under the control of this asset management behemoth to dictate price movement as and when necessary.  Interest expense and credit impairment continues to be understated giving a big artificial boost to profit,” Fajokwu said.

According to him, “the market has gone crazy; do not rub shoulders with it.  If a stock does not deserve to rise to the level it has, when it falls, it will take no prisoners on its reverse journey.  It is better to gain less than to lose more.”