As more banks set to release their third quarter results this week, investors in the beleaguered Nigerian stock market are currently looking up to the banks to make  investment decisions.

Experts said that the anticipated results would determine the direction of the market for the rest of the year. Investors in the Nigerian Stock Exchange (NSE), said that a continuing corporate strength in earnings reports would help stimulate the growth of the market.

The NSE’s All-Share Index, which stood at 24,770.52 basis points on the first trading session of this year –January 4, 2011, had dropped by 19 per cent or 4,9699.16 basis points to 20,071.36 basis points at Monday’s closing bell.

The NSE market capitalisation, which had also been staggering, had also declined from N7.9 trillion at the beginning of the year, to N6.462 trillion on Monday.

Apart from First Bank of Nigeria Plc and Skye Bank Plc, which had released their nine-month results respectively, THISDAY learnt that the results of the United Bank for AfricaPlc (UBA), Zenith Bank Plc and Access Bank Plc’s, were also expected to hit the market this week.

On the other hand, a tentative timetable on the anticipated banks’ nine-month earnings obtained by THISDAY, also showed that results of First City Monument Bank Plc (FCMB), Fidelity Bank Plc, Diamond Bank Plc, Guaranty Trust Bank Plc, are all expected to be released by next week.

Analysts at Renaissance Capital (RenCap) predicted an average loan book growth of 20 per cent for the full year 2011.

According to the international investment firm, the trend in the first half of the year had indicated the banks were on track to meet the projection, adding that quarter under review, was expected to continue in the same direction.

“The only banks which may show significant “funnies” in loan growth numbers are those with exposure to the Zenon-related Non Performing Loans (last significant headache for the Asset Management Corporation of Nigeria).

The process of selling these loans to AMCON begun in Q3, it is unclear whether it was completed by quarter-end. If not, the adjustment will come through in Q4.

“Asset quality and provisioning levels vary across the banks. We anticipate an improvement in asset quality as the balance sheet clean-ups have, to a large extent, been completed. Again, if there are any negative surprises we anticipate they will be related to the Zenon-loans. Banks to watch out for here include Zenith, GTBank, UBA, FCMB and Access,” RenCap argued.

RenCap also predicted the banks would post slight growth in their Net Interest Margin’s (which shows the average interest margin that a bank is receiving by borrowing and lending funds), in their anticipated Q3 results.

“Whilst the CBN continued to raise the Monetary Policy Rate during the quarter, the interbank and treasury bill yields were lower on average in third quarter 2011, relative to second quarter 2011. The spread between the prime lending rate and deposit rate was broadly flat,” they added.

Source: ThisDay/Obinna Chima