Zenith, UBA Lead as Analysts Upgrade Estimates
Following their relatively healthy earnings performance in the financial year 2022, equities analysts at Cordros Capital Limited have raised their target price for Zenith, United Bank for Africa and GTCO Plc.
Signalling optimism level, Zenith Bank attracted higher upgrades, followed by UBA while GTCO whose profit moderated came third in the ranking.
In the period, these tier-1 banks maintained leading positions in the banking sector with stable dividend payout ratios and large profitability in line with industry’s average despite headwinds in the economy.
In its recent equities update, analysts said for ZENITHBANK, they have increased the target price by 27.7% to N34.36, an amount higher than N26.91 previously projected.
According to the investment firm, analysts also maintain their BUY rating on the ticker, saying that the increment to target price is based on expectations of higher interest income buoyed by higher interest rates.
“We also believe that the full transition into a holdco structure will boost non-core income growth as the bank will be able to expand its business and develop new revenue streams.
“However, we note that the challenging business environment – regulatory requirements, higher funding costs and inflationary pressures – still pose potential risks to the bank’s financial performance”.
For UBA, analysts at Cordros Capital increase the target price by 23.6% to N13.67, compared with N11.08 that was previously set for the ticker.
In their report, analysts also maintain BUY rating on the ticker, saying the rise in target price is based on an expectation that the group will sustain this financial performance in 2023, driven by higher funded and non-funded income.
On funded income growth, analysts at Cordros Capital expressed that they believe this will be supported by elevated interest rates in the markets as monetary authorities continue to fight rising inflation.
“We also argue that the persistent increase in digital transaction volumes will boost non-core income growth. In our 2023 update, we factored in underlying risks in the Nigerian banking sector such as; higher cost of funding, inflationary pressures, and higher expected losses on loan books”.
Following a similar pattern, GTCO price target was raised by 12.4% to N31.70 from N28.21. On account of the upgrade, analysts said they maintain BUY rating on the ticker.
“The revised TP is driven by our expectations that the group will deliver positive financial results in 2023. Our projection is buoyed by a projected growth in interest income supported by the elevated yield environment”, analysts said.
They add that an expectation that GTCO will sustain its efficient cost management support the rating.
“…we believe the expansion in the group’s business due to its Holdco status will boost potential growth in non-interest income. In our estimates, we considered the potential risks to the group’s earnings – regulatory requirements, inflationary pressures and higher impairment expenses on the loan book”. #Zenith, UBA Lead as Analysts Upgrade Estimates
