…GTB, ETI, Access, UBN see money flow
Foreign institutional fund managers have stealthily increased their holdings of Nigerian bank stocks, a sign that the cheap shares may be attracting value traders.
Institutional holdings rose in five of the stocks that made up the Nigeria Stock Exchange Banking ten index (NGSEB10), while it remained flat in three stocks and fell in two stocks, as at October 16, data from Bloomberg shows.
ETI saw the biggest increase in institutional buying, which was up 218 percent for the period. Other banks that saw money flow include Diamond Bank (+114.92 %), Union Bank of Nigeria (+4.39%), Access Bank (+4.2%) and Guaranty Trust Bank (+1.1%).
Top institutional buyers of GTB shares (Nigeria’s largest bank by market value) were the Commonwealth Bank of Australia, Royal Bank of Canada and Franklin resources.
A total of 98 institutions owned 13 percent of the outstanding shares of GTB as at October 16, the data showed.
For Access Bank, where 51 institutions hold 10.05 percent of outstanding shares, the top institutional buyers were Somerset Capital Management LLP which increased holdings by 58 million shares and Brown Advisory Inc (+52.8 million shares).
EcoBank Transnational Inc. (ETI), which has 66.25 percent of shares, owned by institutions, saw Robeco Groep NV as the largest buyer of its shares for the period.
Diamond Bank meanwhile had Tundra Fonda AB of Sweden as largest buyer of its shares for the period with an addition of 5.3 million shares.
Foreigners were net purchasers of Nigerian equities for five straight months from April through to August, when inflows reached a 14-month high of N13 billion ($41 million).
Africa’s largest oil producer abandoned a currency peg in June that deterred foreign investment and weighed on the economy, which is heading for its first recession since 1999.
The NGSEB10 index which comprises the ten most capitalised and liquid stocks on the exchange is trading at a price to book (P/B) ratio of 0.55 collectively, compared with a P/B of 1.79 for the FTSE/JSE South Africa Bank index.
The value of stocks in the banking sector is currently being masked by concerns over rising Non Performing Loans, FX valuations and capital adequacy, and while valuations are depressed because of the recession, it presents a chance to acquire distressed and cash-strapped assets at relatively good discounts, analysts say.
“The focus of any interested foreign investor to hold quality Nigerian bank stocks at the moment will be more long-term than short-term. The short-to-medium term outlook for equities in general is still quite cloudy at this point, given the already identified issues,” said Abiodun Keripe, Head of research at Elixir Investment Partners Limited .
“One comforting line is the realisation that the CBN is determined to support the sector in order to avoid any failure. On individual bank basis, some banks are also better placed, probably due to a history of strong risk management, low cost profiles, strong capital base, or their ability to have been more conservative, such as a UBA.”
Access Bank recently completed a $300 million Eurobond issue, boosting tier-2 capital.
GTB and UBA reported third quarter results that beat analysts’ estimates.
GTB pre-tax profits increased 65 percent in the nine month period to N140.8 billion, while UBAs gross earnings and pre-tax profits increased by 9 percent and 8 percent to N61.5 billion and N265.5 billion respectively.
GTB stock is up 33.5 percent year to date, UBA +26 percent, and Access +16.4 percent.
The NSE all share index by comparison has fallen 3.65 percent for the period.
“There was the period following the naira devaluation in June and the release of H2 earnings that saw increased sentiments for some banking names, especially GTbank,” said Tiffany Odugwe, an analyst at investment firm Cardinal Stone partners.
“We think investors currently in the market are basically reshuffling portfolios.”
