- Q3 earnings yield hits 33.47%
The much anticipated Q3 results of key banks on the floor of the Nigerian Stock Exchange hit the market last week and we could say the performance is mixed as we saw growth in the earnings per share of FBNH, Access Bank and Zenith Bank while there was a mild drop in the earnings per share of Guaranty Trust Bank and UBA.
FBNH grew its earnings per share by 31.71% to N1.899 from the EPS of N1.44; Access Bank grew its EPS by 15.68% to N2.88 from the EPS of N2.49; Zenith grew its EPS by 5.70% to N5.07 from N4.80. Guaranty Trust Bank declined in its EPS by 3.20% to N4.83 from N4.99. UBA also declined in its earnings per share by 5.51% to N2.26 from N2.39. This performance is fair based on the current economic reality caused by corona virus pandemic.
Commenting on the Q3 results of the key banks recently released, the Managing Director of Gruene Capital Limited, Bright Otoghile pointed out that there is steady improvement in the earnings of these banks, looking at it from quarter to quarter basis.
According to him “Analysing these results based on the kind of year we are in will give us a fair view of how they have fared in the pandemic period. Whether we like it or not, we are still in the pandemic period. Covid-19 is not yet over. The vaccine development is still on going. Everything we should work on now should be based on how our investment objective is assisted to navigate the terrain in the market.
Share prices of the banking stocks will not be isolated from other sectorial effect because risk anywhere is risk everywhere, shock anywhere is shock everywhere in the market. What we have seen so far in the pricing is that prices have already reflected the performance that have just been released. So going forward, what you will see is seesaw pricing situation. It is now left for investors to take a view that will meet their objectives. A seesaw pricing where by you see up, you see down. Volatility might be downward looking until everything takes its shape back again because there is no other news between now and February or March next year when we will be having the audited accounts. So about 4-5 months in long enough for us to see a seesaw pricing that can give opportunity to take profit and also give opportunity to re-enter; and that depends on the investor’s strategy.
ACCESS BANK
Access Bank reported growth in its top line and bottom line figures. Gross Earnings grew by 15.41% year on year to N592.79 billion from N513.66 billion. Profit after tax grew by 15.68% to N102.3 billion from N88.44 billion.
Earnings per share grew to N2.88 from N2.49, which translates to 15.68% growth year on year. In our Q3’20 Earnings forecast for banks, we projected N2.73 earnings per share for Access Bank based on PEG ratio analysis. Access Bank’s Q3 earnings per share of N2.88 performed 5.49% above our projected EPS of N2.73. At that Access Bank is doing excellently well. Relative to the share price of N8.60, the P.E ratio of Access Bank stands at 2.99x with earnings yield of 33.47%.
Earnings history of Access Bank Plc for Q1, Q2 and Q3 for the past 6 years show that the bank has been consistent in improving on its earnings per share year on year.
Consistent growth is observed in the bank’s results within a financial year, Q1, Q2 and Q3. In other words, there was not a lower performance in a current quarter than the preceding quarter within a financial year.
Over the past 26 years, Access Bank Plc has evolved from an obscure Nigerian Bank into a world-class African financial institution.
FBN HOLDINGS
The big elephant in nine months achieved Gross Earnings of N439 billion, up by 5.29% year on year from the Gross Earnings of N417 billion in Q3’19.
FBNH grew its profit after tax (PAT) by 31.71% to N68.156 billion from the PAT of N51.747 billion.
Earnings per share for the period under review grew to N1.899 from the EPS of N1.44 in Q3’19.
Based on PEG ratio analysis, we projected Q3’20 earnings per share of FBNH to grow to N1.56 from N1.44. The actual Q3 result of FBNH surpassed our projected Q3 EPS of N1.56 by 21.73%.
At the share price of N7.25, P.E ratio of FBNH stands at 3.82x with earnings yield of 26.19%.
The effort the management of the bank have put into cleaning their book of non-performing loan is very credible.
ZENITH BANK
The financial giant reported a Gross Earnings of N508.975 billion, up by 3.6% from the Gross Earnings of N491.268 billion the previous year.
Profit after tax grew by 5.70% year on year, to N159.3 billion from N150.7 billion reported in 2019.
Earnings per share grew to N5.07 from the EPS of N4.8, which translates to 5.7% growth year on year.
Zenith Bank has performed over the years with consistent growth in turnover, profit after tax and earnings per share especially with good dividend pay-out record. The Bank has been consistent with both interim and final dividend.
At the share price of N25.6, P.E ratio of Zenith Bank stands at 5.05x with earnings yield of 19.80%.
GUARANTY TRUST BANK
Guaranty Trust Bank reported Gross Earnings of N329.95 billion, up by 1.20% from N326.03 billion.
Profit after tax of N142.28 billion was reported, down by 3.20% from N146.99 billion reported the previous year.
Earnings per share (EPS) for the period under review dropped by 3.20% to N4.83 from the EPS of N4.99 in Q3’19.
Except for this year due to obvious economic reality, Guaranty Trust bank in the last five years has shown consistent growth in its Q3 earnings per share.
At the current share price of N35.35, the P.E ratio of Guaranty Trust Bank stands at 7.32x with earnings yield of 13.66%.
UBA
United Bank for Africa achieved Gross Earnings of N453.67 billion, up by 5.94% when compared to the Gross Earnings of N428.2 billion achieved the previous year.
The Bank reported a profit after tax of N77.13 billion, down by 5.51% year on year from N81.63 billion reported in the corresponding period.
Earnings per share (EPS) declined to N2.26 from the EPS of N2.39, which translates to 5.51% decline year on year.
At the share price of N8.2, UBA has a P.E ratio of 3.63x with earnings yield of 27.50%.
Stanbic IBTC
Stanbic IBTC in nine months reported a gross earnings of N183.29 billion, up by 4.05% from N176.16 billion reported in the third quarter of 2019.
The Bank declared a profit after tax of N66.16 billion, up by 19.1% from N55.55 billion achieved in Q3, 2019. Earnings per share (EPS) for the period under review is N5.96, up by 19.1% from the EPS of 5.00
With reference to the share price of N43, the P.E ratio of Stanbic IBTC stands at 7.22x with earnings yield of 13.85%.
