UBA, GTB Get Strong Upside as Banks Top Analysts Buy Rating
UBA Plc has 62.4% upside potential according to ARM Securities fair value estimate report for the week, followed closely by GTBank with 50.4% upside. Meanwhile, year to date returns for the two banking stocks is negative 13.3% and 13.4% respectively.
Access Bank Plc has an upside potential of 42%, FBNH 28.8% and Fidelity Bank 33.1%, ARM Securities stock recommendation report shows. The report shows that only Access and FBNH have delivered capital gain in 2021. Access price has seen year to date return of 7.7% year to date while FBNH gained 2.1%.
Equity analysts at ARM Securities take a rather bullish investing stance on Nigerian banks with strong buy ratings with mixed rating moods in the cement and breweries segment.
According to its stock recommendation report for the week, ARM Securities guided investors to buy Zenith bank stock with a fair value estimate of N30.20. In the Nigerian Exchange on Friday, Zenith bank shed N0.05 kobo to close at N23.35, though it opened the week at N24.60.
However, analysts at ARM Securities said they expect revenue to strengthen in the coming quarters, on the back of a higher yield environment and a general pick-up in economic activities, which should strengthen non-interest income.
“Although we also anticipate an uptick in interest expense compared to the previous quarter, the expected increase in non-interest income should be sufficient to counter the uptick and sustain the growth in earnings.
“Considering the company has a sustained history of dividend payments, both interim and final, coupled with the expectations for revenue and earnings, we maintain our position of a strong buy”, ARM Securities explained.
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Also enjoyed ARM Securities strong buy recommendation, analysts set N12.95 as Access Bank fair value estimate. The largest bank share closed at N9.10 on Friday after staying relatively flat during the five trading sessions in the week.
ARM Securities said, “Our 2021 outlook for Access Bank’s interest income is positive considering its strong earning assets base”. Analysts recognised that as Access Bank continues its expansionary activities across Africa, it has a robust agent Banking network that should drive transaction volume.
Similarly, efforts are being made to improve cost efficiency even as impairment is expected to moderate due to improving business conditions. Overall, we expect a positive outlook for Access Bank in 2021, ARM noted.
On the investment firm’s strong buying radar, UBA Plc fair value is currently placed at N12.18 a share, a 17% increase from N10.39 previously estimated for the ticker. In the Nigerian Exchange, the Pan-African lender share price printed at N7.50 after staying relatively flat during the week – it shed N0.10 in the last 7 trading sessions.
In its stock recommendation, ARM said, “Over 2021, we expect growth in earnings to stem from higher net interest income, up 19% year on year, hinged on our expectation of a gradual recovery in interest rates”.
That said, analysts said they are expecting a slight expansion in net interest margin (NIM) which should reflect higher asset yields. Elsewhere, ARM indicates an expectation of a continuous expansion in NIR, up 14% year on year, which reflects the firm’s expectation of higher trading income as well as fee income.
“The impact of these adjustments translates to a revised profit before tax of N180 billion, up 28% year on year”.
WAPCO strong buy rating comes from analysts fair value estimate of N28.61. ARM Securities said Lafarge’s financial year 2020 performance was largely supported by improvement in its cost optimization strategy, which helped delivered a faster growth in operating income than witnessed on its revenue line.
Over 2021, analysts said they are positive on Lafarge Africa Plc with management planning to spend around $60 million to $70 million on the captive power plant for the Ashaka cement plant as well as the debottlenecking of the Ashaka and WAPCO plants.
These investments are in place to unlock as much as 300kt and 700kt of additional capacity in the financial year 2021 and 2022. It also noted the company’s plans to further optimize its energy mix in 2021 may be positive for margins.
UBA, GTB Get Strong Upside as Banks Top Analysts Buy Rating
