By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-United Bank for Africa Plc (UBA), Zenith Bank Plc and Access Bank Plc are amongst the five Nigerian banks that Exotix Limited recommends as best buy stocks because of their valuations and growth potential.
According to a report from Bloomberg Monday, Kato Mukuru, Analyst at Exotic, a London based frontier market investment banking boutique specialising in illiquid bonds and loans, equities, structured finance and capital raising affirms that its now investors should have a strong bias for Nigerian banks.
“We strongly believe that now is the time to have a strong bias toward Nigerian banks,” Kato Mukuru, an analyst at Exotix Frontier Equities, said in an e-mailed note to clients today. “Nigeria also offers something that few sub-Saharan African banking systems can hope to offer – scale,” the report said.
The Exotix report said almost half of Nigeria’s more than 170 million people don’t have access to finance, according to the central bank of Nigeria (CBN).
Exotix further affirmed that with loan penetration in Nigeria increasing by only 5.0 percent (5.0%) points over the past 10 years, the potential for asset growth in Nigeria is probably much larger than in other parts of the continent.
The Exotic research said Zenith Bank, Nigeria’s third largest lender by market value may improve its return on equity to 22.4% by 2017 from the 19.6% it reported last year.
Mukuru the analyst at Exotix said Barclays Bank of Zimbabwe, Standard Chartered Bank Ghana Limited and Ghana Commercial Bank Limited are Exotix’s top sell recommendations. ‘’The Zimbabwean bank runs the risk of an acute deterioration in domestic liquidity and a rapid deterioration in its asset quality amid macroeconomic turbulence,’’ he said.
He said the Ghanaian banks face asset quality and operating cost risks due to increasing interest rates. The Bank of Ghana raised its key lending rate to a four-year high of 18% in April.
