Equity Analysts Offload Banks’ Stocks with Unimpressive Upsides

Equity Analysts Offload Banks’ Stocks with Unimpressive Upsides

A slew of equities investment analysts has activated neutral ratings on some listed stocks amidst the ongoing rout at the local bourse. On the extreme, investors have been advised to dump some of these stocks as their earnings performance appears unimpressive enough to trigger positive sentiment.

Well, listed companies are trading at dip and some say it is a market correction for a local bourse that is largely undervalued against MSCI Index. Whether it is a market correction or not, stockbroking firms are making kills for clients. That doesn’t imply there are no lackeys in the local bourse –anyway.

Sampled stock recommendations from investment banking firm showed some banking stocks that are not on good books due to lack of upsides or are already above their respective target price.

Sterling Bank stock has no ratings that implies potential upside. Wema Bank stock do not enjoy buy rating and Unity Bank, industry’s ‘Banca Rota’ appears to be outside any reasonable analysts’ coverage. 

Equity Analysts Offload Banks’ Stocks with Unimpressive Upsides
Equity Analysts Offload Banks’ Stocks with Unimpressive Upsides

Stock recommendation from United Capital, Atlass Portfolios, Meristem Securities, ARM Securities, Vetiva Capital and CardinalStone offer various insights into where value lies.

Stock ratings document shows FCMB, Sterling Bank, Wema and Union Bank are on the bottom of rating scale with sell order at Atlass Portfolio Limited.

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Due to low upside potential, equity analysts at the brokerage firm activated neutral moods on FBNH and Stanbic with target prices of N3.20 and N50.60 per share respectively.

Meanwhile, Atlass Portfolios analysts are positive on other Tier-1 bank stocks aside FBNH with strong buy in Ecobank Transnational Incorporation with highest upside potential.

Across board, Unity Bank is under review – probably because of its broken balance sheet condition. This bank existence is actually magical!

After demutualisation of the Nigerian Exchange, trading activities have gone sideway, mostly nosedived as selloffs pressure persists.

Though, this gives opportunity for a new entry point, but then liquidity in the financial system is under pressure.

Retail investors have been offloading their holdings amidst quite low portfolio investment inflow into the equity space. Amidst all these, someone is making a kill in the investment space buying the dip.

MarketForces Africa polled investment banking experts’ stockbrokers to get a feel of the market direction. The status quo will be maintained until Q2 earnings season delivers some surprises, analysts said.  

From banking sector to consumers’ goods and the likes, investors just have to understand when to buy, sell or stay neutral on listed stocks.

United Capital:

Of the 7 banks stocks under the firm’s coverage, four earned equity analysts buy rating while the investment firm has activated neutral ratings on three.

United Capital is unlikely to bet large on First Bank, Access and FCMB stocks under its hold recommendation.

Analysts set target price of N8.60 for Access Bank, which is closed to its N8.30 market price on the local bourse at reference date –offering limited upside.

Meaning that, the stock will hit the bottom of the rating scale when it actually trades at N8.60 and assuredly United Capital will take profit at that point.

FBNH stock is already trading above United Capital’s year end price target of N7.10, offering negative return against analysts estimate.

It is very unlikely for United Capital to hold the stock for investors as it could possibly dilute earnings from the portfolio assets.

FCMB shares similar issue as FBNH. A number of equity analysts have not been finding value with FCMB stock – the stock appears to have enjoyed limited or rather scarce buy rating from the Broadstreet.

Investors valued the bank at a little above N60 billion.

On United Capital recommendation list, GTBank, Fidelity, Zenith and Stanbic made buy ratings with upside range from 12.8% to 42.5%.

The king in this category is GTBank stock that analysts view could offer 42.5% upside return followed by Zenith Bank 32.2%, Fidelity 17.6% and Stanbic 12.8%.

Afrinvest

Access bank is a buy for Afrinvest with price target sets at N10.35 following a downgrade from N10.44 initially envisage. Ecobank still has highest upside potential of 53.5% as Afrinvest sets target price at N7.83.

Afrinvest does not have Zenith, Fidelity bank, Union Bank, Wema, Stanbic FCMB and Sterling on list of buy recommendation.

For Unity Bank, analysts have no recommendation while others place it under review- possibility a negative watch rating.

Equity Analysts Offload Banks’ Stocks with Unimpressive Upsides

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