₦airaland Forum

pluto09:
Are Nigerian banks cheap at current price, yes.
Are they trading at their lowest historical valuation?,this I think is debatable.

Debatable based on what you think or what you know?

I have been active in this market since 2003. My dad has been active since the early 80s. These valuations have not existed in all that time.

The largest bank in the country trading at a forward pe of less than 1?

I stand to be corrected but unless somebody comes at me with some actual numbers from another time period then I will stand by what I have said.

The circumstances that created this market will most likely not be repeated in our lifetime

KarlTom:
Exactly!
There's a possibility based on market sentiments.

@Nosa2 was speaking with 100% certainty...

You don't seem to know the valuations Nigerian banks are trading at vs their historical valuations

emmanuelewumi:
They said that 16 years ago based on market sentiment, not based on logic, facts and figures

I'm 2009 banks were not trading at these valuations. Valuations were much higher.

He is mistaking price with valuation

KarlTom:
About 16 years ago, someone somewhere said something similar

Let's not be too sure of ourselves.
In recent history, bigger, better institutions have failed...

16 years ago banks were not trading at these valuations

Sunrisepebble:
To be fair he could still have the last laugh. I was buying previously in expectation of FY results and dividend.
My strategy could change if they get to my valuation.
Note that this year they will not have FX gains anymore the way they did last year

You will not see these valuations again in your lifetime. You may see the price, due to stock splits etc, but to think you will see GTB trading at a pe of less than 2 again in the next 50-60, years is delusional

ojeysky:
Even though I wish this could happen to my little bag of access I think 90 is a tall order o....if access makes 90 it means zenith/gtco will be at 150. Well it's possible if naira further devalues sha

You get these kind of beliefs when you invest based on price not valuation.

Look at the valuations for the bank and you'll see that a N90 price is slightly below fair value given already released numbers.

If those numbers change the N90 can change as well.

HesInMe:
Serious question about a serious stock: How did you get to N90/share, please?

What does book value mean?

What is the book value for Access Bank?

Coolcash1:
Let me drop this!

Buy sterling bank and thank me later.

I don't see anything special in the fundamentals of Sterling Bank. Abeg share the reasoning behind your recommendation

olaremint:
If the thing reach 50 peken, na detty January be that

Why are you people in such a rush to sell? Unless you need the cash, you shouldn't be looking to sell Access at anything below N90.

Even that N90 is based on current valuations. If results come out and the valuation changes then that number should change accordingly. Don't get excited and leave the real money on the table

megawealth01:
So you want to enter my Access

If I can raise funds before it crosses N40 I will buy. Else I will wait to see Q4 results

Sunrisepebble:
I sold a small percentage of my total holdings, not all. Its still undervalued I know, but when a bank does 10%, I will always take some profit

Once again, investment is not a team sport. I took a look at my spreadsheet in order to respond to your post and right now I am looking for funds to buy access bank. So its in my best interest for there to be more sellers of access bank. Return on Equity is low compared to Zenith or GTB but the Price to Book Value Ratio is crazy low.

Sunrisepebble:
Ive taken some small profit off the table just now sha

Unless you needed the money, you should have held on.

At current price, book value for Access bank is 92.87

Price to book ratio is 0.3

Forward p.e is 1.68.

Once again, I think you sold way too early.

Make investment decisions based on valuations not price.

KarlTom:
The movement of the banks is sweet to behold...

Journey never start

starpower:
That what makes financial stocks risky and with low p/e it the quality of assets and earnings. You cant derive high interest from low risk loans. It a wide guess

Ok. I don't agree Sha but ok.

starpower:
inflation means borrowers are passing cost to consumers, high interest rate causes deflation, credit needs a booming economic on small steroids I.e healthy I inflation. Currently banks are soon going to be honest with bad loans that got cbn asking them to shore up equity for shocks. Abi otedola action 🎬 😏 film not letting you know what up soon.

Are you suggesting that NPL's are being hidden?

Agbalowomeri:
Means bank bears is around the corner in the coming months

RSI is not forming new high the same way price is forming new high

Am I a contrarian?

I truly hope price of bank stocks come down

pluto09:
I think one should have taken position before now.
If I am to buy any of the banks now, my decision would mostly be influenced by TA more than FA.

I got in earlier but if I get money and valuations remain where they are, I'm buying more.

Remember that price and valuation are not the same thing. I am looking at valuation not price

pluto09:
Even if you use P/B, the tier banks are still cheap.
Zenith P/B is less than 0.5, Access is around 0.3..post dilution access will still not be up to 0.4.
Note: my contributions to the discussion on valuation of Nigeria banks doesn't mean I will buy bank shares at current market price.

You won't see these banks for less than what you are seeing now. Either you buy now, not higher or don't buy at all

HesInMe:
Careful. Banks aren't typically valued using price-to-earnings (P/E) ratios and almost always trade at a deep discount to market P/E. So a low P/E doesn't necessarily mean they are cheap.

Price-to-book (P/B) is a better metric. Banks are asset-heavy, and most of those assets are financial, so their P/Es are particularly sensitive to accounting adjustments like loan-loss ratios and revaluations. Think Oando's accounting on steroids.

If you want to bet on banks now, I'd look at the ones that are still growing their more predictable fee income.

And the price to book for Nigerian banks is still very low

HesInMe:
I agree. But you're actually making the case for not investing in banks. You and I can go and buy the very same high-interest FGN and corporate bonds the banks are accumulating. Why pay executive salaries and office space for the privilege?

Investing is not a team sport. For every buyer there is a seller. Only one is them will be right

ositadima1:
There seems to be a misunderstanding between you and Nosa. Both of you are raising questionable points, so let me start with yours. Why should banks experience a fall in interest margins? That gap is set by the CBN (I’m about 85% sure) and is independent of interest rates. If such a fall should happen, it would likely be due to high-interest rates reducing the demand for loans.

I don’t think there is a ceiling to banks' earnings; as long as the economy is growing, banks will grow along with it. A growing economy needs financing, which banks provide.

Now, to address Nosa’s point: the equity being raised through new shares is not likely to be used for generating returns. I believe it will be kept as reserves to absorb shocks. So, the argument about returns on equity may not hold in this case.

The dilution caused by the additional shares will likely be balanced by growth, some of which will come from their substantial dollar gains.

Disclaimer: As always, I’m no expert on the matter. This is based on bits and pieces of information and some imagination.

There is no way banks will raise more capital and not deploy it. Return on equity just shows the efficiency of the company in milking out profit from the capital they have.

Please don't forget that as rates fall bond prices go up. So bonds being bought today will be more valuable as rates come down in the future

HesInMe:
I didn't think it was a controversial position. Nearly all new equity issues are dilutive in the short term: You're expanding the number of shares chasing a given amount of profit. Except you think the profit will grow at a faster pace than the share count.

So the real question here is: How will the banks grow their earnings from here on? We all just assume the music will go on and on and on. No one is seriously tackling this question. Keep in mind that we're supposedly at peak interest rates, so their net interest margin (the difference between loan and deposit rates) should fall going forward. And the formal sector is nearly fully banked, so opening another branch in Opebi will not help much.

Access is the only bank that seems to appreciate this challenge, but they're currently on an acquisition binge.

You're right that we are at peak interest rates but guess what? (I suspect) Banks are buying the FGN bonds at record pace. And when rates start to fall these bonds will go up in value and we will potentially have another windfall.

Heads banks win, tails banks win

Redoil:
what about share dilution due to the right issue

Banks use money to make money. Having more money only means they will make even more money. Hence return on equity is important.

ojeysky:
No way Zenith and GTB will move without slight movement in Access/UBA it's just people's instinct. If not for access and their buy buy up and down UBA should not be senior to them

If not for the problem there won't be a problem.

ChukaLupin:
Guys, GTCO and ZENITHBANK and FIDELITYBK reached their all time highs this week.

Any ideas?

The journey is just starting. If you have money buy Zenith and/or GTCO

Sunrisepebble:
Pls explain your position with the bank recapitalization and the dilution effect. Maybe there’s something I’m missing in my own view also.
Personally I feel these banks are still very cheap on FA terms, even with dilution effect, the PEs are not high at all.

His reasoning is not fully thought out.

ojeysky:
Good, at least my access will get to move as well

It's not a horse race oh. Return on equity for access Bank is not impressive when compared to the likes of GTCO and Zenith

HesInMe:
It is beyond perplexing o. The market seems to be telling us that banks can just issue new equity, then -- abracadabra! -- turn around the cash and grow their earnings per share in a few short months.

So why don't they keep issuing new shares in perpetuity?

Because it's more efficient for them to borrow. Look at the meaning of return on equity

megawealth01:
Then Oando will cross that $1 I usually say amusingly

designking:
Dilution is coming...I am only going to buy bank shares after dilution.

It is in my best interest for you not to buy. I have bought and I will buy again if valuations stay at these levels when next I'm liquid

Mpeace:
Gtco at 60 is a good sign for others

GTCO is heading to N400. Just relax and enjoy the ride

Sunrisepebble:
You want to scare Nigerians away from capital markets?
I think the 10% rule is fine. It has its pros and cons. For instance without it, this our Wapco news (in an efficient market) would have taken the price from 58 when the news was announced straight to around the 100 figure where the buyout figure is. However in our case, we will have to slowly crawl day by day and deal with profit takers along the way. Knowing how impatient and fearful Nigerians are with money, if stocks lose more than 10% in a day and there’s no limit, nobody would invest again. It’s the 100k block rule I personally don’t agree with

I think the rule is rubbish for the exact same reasons you mentioned.

megawealth01:
Na only crypto I see for the list. Where is it trading FUTURES?

I dont understand