It’s no longer news that Nigerian banks play a leading role in Nigeria’s financial system. However, the banking sector, which has over the years been the most liquid sector in the Nigerian stock market, has experienced significant price swings lately.
Also, based on recently released financial statements by the Nigerian banks, a high number of listed banking stocks in the Nigerian stock market have the potentials to reward investors with solid returns, as they remain fundamentally good and are expected to withstand the current unfavorable economic climate this year.
Nairametrics interviewed some financial experts, entrepreneurs, and corporate heads and asked for their opinions on their favourite banking stocks and why they chose them.
Their reasons for selecting these bank stocks were instructive and varied, from the usual tier-1 banking brands (GTbank, Zenith Bank, Stanbic Bank, Access Bank) to other emerging brands like Sterling Bank. See their responses below.
Jerry Nnebue, Banking Analyst at CardinalStone Research
“Lower interest earnings (due to low yields and the slowdown in loan growth) and deterioration in asset quality are likely to pressure returns due to the pandemic. Prudential ratios could also be severely tested.
Nevertheless, we see opportunities in specific names due to depressed valuations and their ability to withstand the potential short-term pressures from the pandemic.
Notably, we favour GUARANTY, ZENITHBANK, and STANBIC on their stronger ROE potential and wider capital buffers over the regulatory minimum.
We are also optimistic about FBNH following the recapitalization of the commercial bank and the impact of years of loan book clean-up.”
Silas Ozoya, Managing Partner/CEO SUBA Capital
“Investing in Nigerian banking stocks would mean me looking at their performance over the last 5 to 10 years. In terms of innovation, stability, growth, the dividends declared, and market capitalization.
When you measure with those, a few banks would come to mind.
GTBank, Access Bank, Zenith would be my top three picks, then Sterling Bank would follow. Those guys have been doing some amazing product innovation that deuces sales for them.
Then finally, First Bank, because of its long time stability. It would function like the hedge in the portfolio.”
Yele Bademosi, CEO, Bundle.africa
“GTB because they still have a very strong brand reputation amongst millennials and Gen Z and they’ve shown a history of innovation with products like **737**, Habari, and Quick Credit.
Access Bank, the merger between Diamond and Access creates one of the largest banks in Nigeria, whilst the jury might still be out on the success of the merger.
I wouldn’t bet against the leadership team to make this a success.
Sterling Bank is my top pick because I think they have the largest potential for growth, they have a unique structure and clear focus areas that are centered around technology and innovation that I think could pay serious dividends in the future.
Their vision is bold and it’s going to be the execution that makes or breaks them.”
Darlington-Morsi Onyemaka, Co-founder Quba Exchange|Forbes Accelerator Cohort ’20
“Sterling Bank (STERL).
First of all, the Nigerian stock market is mostly suitable for long term investing, and as such, my investment criteria are leadership and innovation.
In the area of leadership, I’m very confident in Abubakar Suleiman’s leadership for Sterling Bank given his track record and age.
STERL also ticks the box of innovation with the introduction of its online bank (One Bank) which positions them to withstand and likely outperform emerging competitions in the online banking space.”
Omeiza Makoju, ACCA energy analyst
“In the last 6 months, the banking sector has been hard hit by the COVID-19 scourge, the “staggered devaluation” of the Naira, stringent regulations from the CBN, and the drop in oil prices.
As a value investor, my favourite banking stocks in no particular order are GTBank, Zenith Bank, UBA, and Access Bank.
I choose these banks because they have strong fundamentals and metrics. They are all dividend-paying with yields above 10% and the P/B (MRQ) of Zenith, UBA, and Access Bank shows that they are currently undervalued.
At a time like this where the Naira/USD Exchange rate and the inflation rate is rising,
I have also chosen these stocks because they provide some form of inflation protection in the absence of USD instruments.”