Ecobank: Analysts See 62% Upside on New Target Price
Analysts have raised Ecobank Transnational Incorporation (ETI) 12 months target price to N34.40 per share following the Pan African lender earnings release.
In its company update, CardinalStone Securities Limited said it spotted 62% upside in the financial services group with its revised target price to reference price of N23.70.
“Our target price reflects an exit price to book ratio of 0.6x, which represent an increase from 0.5x. The bank is projected to post a return on equity of 23.8% in 2024 as against 17.0% average over the last 5 years”, CardinalStone said in its company update.
Analysts also noted that Ecobank current P/B of 0.5x is at material discount to Middle East and Africa (MEA) peer average of 1.1x, thus retain BUY rating on the counter.
In 2023, ETI’s earnings defied notable currency weaknesses in Zimbabwe (-89.0%), Nigeria (-50.0%), and Ghana (-29.0%), expanding by 11.0% to $406.9 million, CardinalStone stated in its update.
Analysts said the performance highlighted the more profound impact of sustained net-interest margin expansion in key operating regions, which drove net interest income (NII) higher and a robust trading income.
The investment firm said on the hand, in USD terms, the bank reported a balance sheet contraction, with total assets declining by c.6.0% due to the mentioned currency weaknesses in its 2023 financial results.
For financial year 2024, analysts at CardinalStone said they adjusted expectations for net interest margin (NIM) and interest-earning assets (IEA) to 5.7% and $20.5 billion, respectively versus 5.4% and $21.4 billion in 2023.
This leads analysts to a 2.1% year on year growth in 2024 estimated non-interest income.
“The modest uptick in NIM reflects the impact from the still elevated yield environment, while the expected contraction in IEA is consistent with the negative impact of currency weaknesses in major operating regions”, CardinalStone said.
Elsewhere, analysts said project the group’s non-interest revenue (NIR) to grow slightly by 3.0% as against 5.3% the Pan African lender did in 2023, given observed weaknesses in trading income in the first quarter. In the period, Ecobank reported a 9% year on year decline in trading income.
“We now expect financial year 2024 earnings to grow by about 8.0% to $439.6 million”, CardinalStone forecasted. FCCPC Frowns at Increased Sale of Adulterated Foods
