Banks have lion share of NSE 30 profits in Q3
Lenders in Africa’s largest economy have remained resilient despite the volatile and tough operating environment as they continue to outperform other sectors on the floor of the bourse.
The the introduction of the Investors’ and Exporters’ (I and E) window and the apex bank’s continued issuance of Treasury Bills (T-bills) in the last 6 months that resulted in attractive yields is boon for these lenders.
Banks accounted for 64.2 percent of NSE 30 Index’s profits earned in the first nine months of 2017 as the sector provides over 50 percent liquidity on the exchange.
Zenith Bank, Ecobank Transnational, Guaranty Trust Bank (GTBank), First Bank Nigeria Holdings, Stanbic IBTC Holdings, United Bank for Africa (UBA), Union Bank of Nigeria (UBN) and Zenith Bank, generated N526.0 billion of the total profit of N818.43 billion earned by the NSE – 30 member firms in the period.
The NSE – 30 which tracks the top 30 listed firms on the Nigerian Stock Exchange (NSE) in terms of market capitalization and liquidity accounts for 94 percent of the stock markets N13.54 trillion total market capitalization.
“Most players in the industry especially foreign investors consider liquidity as they look at the average volumes,” said Ayodeji Ebo, managing director and chief executive officer of Afrivest Securities Limited.
“The activities of the market have always been skewed towards the banking sector. They have a steady earnings and dividend policy,” said Ebo.
Lenders are the best performer on the exchange this year as the banking index has gained 71.06 percent year to date, outperforming the NSE All Share Index (ASI), performance of 46 percent.
Lenders, especially the large ones saw a significant growth in third quarter earnings, underpinned by improved yields on the loan book and high yields from money market instruments as interest Income.
For now, analysts still see banks driving a big portion of the overall earnings growth.
The NSE-30 firms as a whole saw earnings surge by 42 percent to N818.43 billion in the Q3, 2017 period from N575.39 billion in Q3, 2016, based on data compiled by BusinessDay.
Industrial goods firms were the second biggest profit generator in the period with Dangote Cement and Lafarge Africa combined profits of N194 billion equivalent to 23.7 percent of NSE-30 profits.
This was followed by consumer goods firms (Dangote Sugar, 7UP, Flour Mills, Guinness, International Breweries, Nigerian Breweries, Nestle, Unilever and PZ), responsible for 8.1 percent of NSE-30 profits.
Oil and gas firms (Conoil, Forte Oil, Mobil, Oando, Seplat and Total), had 3 percent of profits in the index for the period.
Energy companies have floundered in Nigeria as attacks on oil pipelines in the Niger Delta region combined with lack of reform in the downstream space is squeezing cash flows.
Also, corporate governance issue relating to oil and gas giant Oando Nigeria Plc has soured investors’ appetite for the company’s shares.
The SEC has ordered a forensic audit of the firm’s affair over alleged ‘insider dealings’ and ‘manipulation of the company’s shareholding structure’ in breach of the Investments & Securities Act 2007 and the SEC Code of Corporate Governance for Public Companies.
“If not for the technical suspension on Oando’s shares, the shares would have been further beaten down,” said an analyst who doesn’t want his name mentioned.
Seplat Petroleum Development Corporation recorded a loss of N1.62 billion as at September 2017 while Total Nigeria, Mobil Nigeria and Conoil recorded 48.79 percent, 20.02 percent and 24.49 percent drop in net income to N5.95 billion, N4.59 billion andN1.35 billion in the period under review.
The NSE Oil and Gas Index have returned -7.01 percent this year, underperforming the wider NSE All Share Index (ASI).
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