Investors appeared to be reevaluating their portfolios in favour of large-cap banking stocks to hedge against trading risks and lock in values ahead of the release of the audited accounts and dividend recommendations of Nigeria’s largest banks.
The trio of Guaranty Trust Bank (GTBank) Plc, Nigeria’s largest financial services institution; Zenith Bank International Plc, second largest bank and FBN Holdings Plc, Nigeria’s oldest banking group accounted for more than half of the N20.3 billion transactions at the Nigerian stock market last week.
Trading data at the Nigerian Stock Exchange (NSE) at the weekend indicated that the three banks accounted for turnover of 621.15 million ordinary shares of 50 kobo each valued at N11.289 billion in 6,718 deals. These represent 42.0 per cent and 55.6 per cent of the total turnover volume and value recorded during the five-day trading week at the NSE.
The NSE had seen a marginal slowdown in the momentum of activities as aggregate turnover dropped to 1.48 billion shares valued at N20.3 billion in 23,263 deals last week compared with 1.56 billion shares worth N26.07 billion traded in 21,444 deals two weeks ago.
Chief Executive Officer, Sofunix Investment and Communications Limited, Mr. Sola Oni, said the market trend was representative of the market psychology of risks and returns as investors continue to readjust portfolio in the light of crash in fixed-income yields.
The Federal Government last week offered a return or coupon of between six and seven per cent on its two to three years savings bonds. Most analysts expected the dividend yields on the three banking stocks to be within the same bracket in addition to the potential for capital gains.
Steep decline in share prices and steady corporate earnings have considerable increased potential dividend yields for several stocks.
The duo of GTBank and Zenith Bank are widely regarded as resilient stocks with potential for capital gains and comparatively good dividend yield while many analysts have commended recent improvement in the underlying performance of FBN Holdings, the holding company for FirstBank of Nigeria (FBN).
Most analysts included the three banks as stocks to watch for potentially high returns in 2020. For instance, Analysts at CardinalStone included four banks in their portfolio of 10 stocks to watch in 2020 including Zenith Bank, United Bank for Africa, GTBank and FBN Holdings.
Analysts at Meristem Group also included GTBank and Zenith Bank as two stocks with strong potential for dividend flow and capital gains.
Market pundits attributed the increased stakes on the banks to the impending release of the audited financial statements and dividend of the banks, especially GTBank and Zenith Bank.The boards of GTBank and Zenith Bank had met and approved the audited reports and accounts for the year ended December 31, 2019.
The two banks had subsequently forwarded the approved reports to the Central Bank of Nigeria (CBN) for regulatory review and approval. Most pundits believed the results and dividend recommendations will be released within the next three weeks.
GTBank, which had maintained a consistent track record of twice-a-year dividend payment, is widely expected to pay a final dividend not less than N2.45 per share paid for the 2019 business year.
By third quarter, GTBank’s pre-tax profit stood at N170.7 billion in 2019, a modest 3.9 per cent increase on N164.2 billion recorded in comparable period of 2018.
The results for the period ended September 30, 2019 showed that net profit closed third quarter 2019 at N146.99 billion as against N142.22 billion posted in corresponding period of 2018. Earnings per share thus rose from N5.03 to N5.19.
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