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Indices rebound by improved H1 bank earnings, materials sub-sector

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[FILES] Nigerian Stock Exchange (NSE)


Improved half-year (H1) earnings reports presented by some banks and companies in the building materials sub-sector lifted market indices last week.
Specifically, at the end of last week’s transactions on the trading floor of the Nigerian Stock Exchange (NSE), the the NSE All-Share Index (ASI) and market capitalisation appreciated by 2.33 per cent and 2.39 per cent to close the week at 27,779 points and N13.523 trillion respectively.

Similarly, all other indices finished higher with the exception of NSE Insurance and NSE Industrial Goods Indices, which depreciated by 2.13 per cent and 0.41 per cent, while the NSE ASeM index closed flat.

An analysis of Zenith Bank’s half-year performance showed that its gross earnings grew by three per cent from ₦322.2 billion to ₦331.6 billion, driven by a significant growth of 24 per cent (year-on-year) in non-interest income.Furthermore, its fees from electronic products increased by ₦17 billion (168 per cent) from ₦10 billion in H1 2018 to ₦27 in H1 2019, demonstrating significant progress in our retail banking initiatives.

The bank’s top-line growth filtered through to the bottom-line as Profit Before Tax (PBT) increased to ₦111.7 billion, reflecting a four per cent growth over ₦107.4 billion reported in H1 2018, with earnings per share (EPS) increasing by nine per cent to ₦2.83 in H1 2019 from ₦2.60 of the corresponding period.

Based on the improved performance, the directors of the bank are proposing an interim dividend pay-out of 30 kobo.Last week, there was also a widening market breadth that saw more stocks appreciate in value, as traders took advantage of the prevailing low stock valuations to position, particularly in the banking and industrial goods sectors.However, analysts have argued that the first gain recorded by the composite ASI and market capitalisation was achieved on a very volatile outlook and low traded volume.

The Chief Research Officer of Investdata Consulting Limited, Ambrose Omodion, said: “The bullish sentiment resulted in the upsurge, a sign of active bargain hunting that however needs improved transaction volume to confirm direction.

“Judging by the recent development, it is clear that the market is setting the stage for another bear rally on a bearish trend,” he said.Also, analysts at Codros Capital, said: “Our view continues to favour cautious trading, owing to the fact the gains recorded this week were not broad-based.

“Nonetheless, we note that valuations remain attractive, while price deterioration has resulted in expected dividend yields on some stocks rising significantly to levels on par with yields on Treasury bills. Hence, we advise that long-term investors consider appropriately timed investments.”
Further analysis of last week’s trading showed that a turnover of 1.147 billion shares worth N14.082 billion was recorded against 1.101 billion shares valued at N17.082 billion that changed hands in 15,431 deals during the preceding week.The financial services industry (measured by volume) led the activity chart with 840.704 million shares valued at N10.765 billion traded in 11,331 deals, thus contributing 73.30 per cent to the total equity turnover volume and value respectively.

The conglomerates industry followed with 111.231 million shares worth N243.124 million in 963 deals, while the third place was ICT Industry, with a turnover of 95.087 million shares worth N605.135 million in 404 deals.Trading in the top three equities namely, Guaranty Trust Bank Plc, Access Bank Plc and FBN Holdings Plc (measured by volume) accounted for 484.003 million shares worth N8.306 billion in 4,265 deals, contributing 42.20 per cent to the total equity turnover volume.


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