The Nigerian Stock Exchange All Share Index is currently down 11.66% year to date and is one of the worst stock exchanges in the world. While the exchange has performed badly banking stocks are even worse being down 15% year to date
Stocks have been under pressure for a number of reasons. Analysts attribute some of this to global economic sentiments to emerging markets, the uncertainty of Nigerian government policies, the future direction of the exchange rate, etc.
Despite these negative sentiments to stocks, particularly banking stocks, there are some that seem to be bucking the trend. Two banking stocks, in particular, are posting double-digit growth in their stock prices this year to date.
Sterling Bank: The tier 2 bank has gained a whopping 23.68% year to date and is currently trading at N2.35
Fundamentals 2019 H1
- PE Ratio- 7.2X
- PB Ratio- 0.6x
- One year return – 62%
- PBT – N6 billion (-5.6%)
- Total deposits – N825.8 billion (+12.6%)
Commentary: Sterling Bank posted a 2019 half-year pre-tax profit drop of N6 billion (-5.6%). Thus it is unclear what is driving up its share price. When we see price pops like these we often attribute it to a possible capital raise that could affect the company’s market value. We may be wrong but experience at the Nigerian Stock Exchange is the best teacher. Sterling Bank has a young and vibrant board that is ready to prove itself. They have also been in the news for all the right reasons.
Union Bank: The former Tier 1 lender has also been one of the major gainers in the banking sector this year. The stock has gained 25% and currently trades at N7 per share as of Friday 13th September.
Fundamentals 2019 H1
- PE Ratio- 11.26X
- PB Ratio- 0.87x
- One year return – 40%
- PBT – N12 billion (-3.9%)
- Total deposits – N1 trillion (+1.9%)
Commentary: Union Bank is perhaps one of the most expensive banking stock if you consider using price-earnings ratio. Last July, the shareholders approved a capital reduction of N54 billion from the bank’s accumulated losses set-off against its retained earnings. This will enable the bank to eventually pay dividends. This could perhaps be one of the reasons why it’s share price has been on the increase. In fact, the share price hit N7.5 (its year high) when the news was announced.