Bloomberg News

Nigeria’s Diamond, Skye, UBA Banks Rated ‘Outperform’ at FBN

July 05, 2011

(Updates with bank ratings from fourth paragraph.)

July 5 (Bloomberg) -- United Bank for Africa Plc, Nigeria’s fourth-biggest lender by market value, was rated “outperform” in new coverage by FBN Capital, which initiated monitoring of the West African nation’s nine biggest banks with a “stable-to- positive” outlook.

Diamond Bank Plc and Skye Bank Plc were also rated “outperform,” analysts including Lagos-based Olubunmi Asaolu and Tunde Abidoye wrote in an e-mailed report dated yesterday.

“Nigerian banks are in their most healthy state since 2009 when a home-grown, non-performing loans crisis and the global recession threatened the stability of the entire banking system,” they wrote. Prices of the stocks may rise by an average of 34 percent by the end of the year and 65 percent for lenders rated “outperform,” according to the analysts.

The central bank provided 620 billion naira ($4 billion) to eight of the nation’s 24 lenders after loans to equity speculators contributed to 700 billion naira of non-performing debt, according to the Economic and Financial Crimes Commission in Abuja. Governor Lamido Sanusi fired the chief executives of the distressed lenders and set up Asset Management Corp. of Nigeria, or Amcon, to buy bad debts from the banks to help recapitalize them.

Zenith Bank Plc, Nigeria’s largest lender by market value, is FBN Capital’s preferred pick out of the investment bank’s “neutral”-rated banks that also include Guaranty Trust Bank Plc, Access Bank Plc, First City Monument Bank Plc, Fidelity Bank Plc. Stanbic IBTC Bank Plc was rated “underperform.” None of the lenders FBN Capital covers were rescued by the central bank.

2012 Growth Estimate

The Bloomberg NSE Banking Index that comprises the 10 biggest Nigerian lenders has slumped 63 percent in three years.

“We expect sector earnings to return to double-digit growth in 2012, though not to the extent seen in 2005 to 2007,” the analysts wrote. This year’s earnings “are still likely to be volatile due to one-off items stemming from gains and losses arising from sale of assets as banks move to comply with the CBN’s plans to overhaul the universal banking model and non- performing loan sales to Amcon.”

--Editors: Ana Monteiro, Linda Shen

To contact the reporter on this story: Chris Kay in London at ckay5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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