Lead Securities’ analysts point to major banking stocks to watch in 2021
THE CUR RENT BEARISH trend in the local equities market still stands non-daunting to sentiments of market investors as it is expected that the FY 2020 profit from major financial institutions will begin flowing into the market from February till the end of the first quarter of 2021. Also, high anticipation level exists in the local bourse for decent earnings from the bellwethers and the hunt for dividend, which is expected to sustain the sentiments of investors for two years, and consequently, prodding buying interests.
According to a compiled list of major banking stocks to watch in 2021 by Lead Securities and Investment Limited, a stock and investment brokerage firm, which deals in buying and selling of securities on behalf of its clients, the brokerage firm has delineated some major driving factors behind its buy ratings for these stocks.
Some of the banking stocks to watch out for in 2021, according to Lead Securities, include:
UNITED CAPITAL
rian Stock Exchange (NSE) with an attractive yield of 10 per cent and also maintains a BUY recommendation from Lead Securities. Overtime, UCAP has shown strong performance, sustained growth and capability to navigate the current economic challenges. Thus, its third quarter of 2020 earnings recorded significant gains across key indicators, as gross earnings grew by 32.8 per cent to N7.1 billion from N5.3 billion in the previous quarter, Profit before tax grew by 26.1 per cent to N4.1 billion, Profit after tax grew by 26.1 per cent to N3.5 billion and Net Assets grew by 2.5 per cent from N19.6 billion to N20.1 billion.
ZENITH BANK
Zenith Bank has maintained its position as a Tier One bank in Nigeria as it has continued to deliver stellar performance over the years. Despite the economic disruption brought about by the covid-19 pandemic, the bank showed resilience in 2020 and recorded moderate growth. Also, Zenith Bank recorded a bottomline growth of 5.7 per cent to N159 billion in nine months during 2020, and currently has an attractive dividend yield of 9.56 per cent. With a history of a healthy balance sheet, strong asset quality due to diversified loan books, cost efficiency and sustainable business model, Lead Securities recommend a BUY rating for ZENITH Bank.
UNITED BANK FOR AFRICA
Africa’s global bank, United Bank for Africa (UBA) remains one of the fundamentally sound banks in Nigeria with strong branch network within Nigeria and its presence in some Africa countries, the UK, USA and France. Like its peers, the banking group showed resilience in the previous year, disregarding the effect of the pandemic on the economy as the bank recorded a double-digit improvement across all its major income lines. Accordingly, a review of its nine months results in 2020 saw the bank grew its Gross earnings by 5.9 per cent year-on-year growth to N453.67 billion with a price
earnings ratio of 3.6x and a dividend yield of 8.65 per cent. However, Lead Securities recommend a BUY rating for UBA.
ACCESS BANK
Also on the list is Access Bank. After its acquisition of Diamond Bank in 2019 and its expansion in other African countries through some forms of mergers and acquisitions, Access bank is currently the bank with the largest customer base. This has also trickled to its earnings as it posted strong gains in 2020. In a review of the bank’s nine months earnings in 2020, Gross earning and PAT grew by 15.4 per cent and 15.7 per cent to N513.65 billion and N88.43 billion respectively. Thus, the banking giant is expected to deliver better performance this year and a BUY rating was recommended for the bank.
GUARANTY TRUST BANK (GTB)
Given the GTB’s stronger capitalization level and higher operational efficiency, the Guaranty Trust Bank remains the toast of investors across investment horizon and orientation spectrum. GUARANTY remains a BUY recommendation from Lead Securities on the back of an attractive dividend yield of 7.61 per cent, its strong performance over the past years, and sustained growth alongside remarkable cost efficiency. Similarly, GTB’s Q3’20 earnings showed improved performance, hence indicating the bank’s ability to stand in the midst of economic challenges, coupled with the effect of COVID-19. Accordingly, its balance sheet remained well structured, diversified, and resilient with Total assets and Shareholders’ Funds closing at N4.574 trillion and N755.5 billion respectively.
FIDELITY BANK
Following a positive set of its third quarter of 2020 results, Fidelity Bank’s Net interest income appreciated by 28.8 per cent from N58.2 billion to N75 billion. Profit before Tax also increased by 3.6 per cent. Fundamentally, the bank has over the years implemented a retail digital banking strategy and that has continued to deliver, with the aim to achieve a double digits growth for the seventh consecutive year. However, Lead Securities foresee value over the medium to long term and maintains its BUY recommendation for Fidelity Bank.