Zenith, GTCO are Top Bank Stock Picks for 2024 – Cordros

Zenith Bank Plc, and Guaranty Trust Holding Company (GTCO) Plc will outperform the broad stock market index again in 2024, according to Cordros Securities.

This year (2023) saw an unbridled market rally that most prognosticators never saw coming, but investors took advantage of the bullish run and made a lot of money.

Of course, the market friendly policies of president Bola Ahmed Tinubu hefted the market to become the best performing among global and African peers even as the central bank’s tightening campaign to rein in inflation stoked currency devaluation that squeezed profit of most non-financial firms.

Looking ahead to the New Year, Cordros Securities Limited, an investment house, is sanguine there’s still money to be made in these high flyers, naming some of this year’s big winners as the best buys for 2024.

According to analysts at the research house , Zenith Bank with (potential upside: +27.7%), will maintain its earnings growth run supported by the elevated interest rates and strong balance sheet, strong capital adequacy ratio (9M-23: 21.9% | 2023E: 20.8%), which they added denotes capability to drive business growth internally, and potential growth in non-core income given the bank’s Holdco transition strategy.

Their rating on GTCO (potential upside: +15.2%) is driven by the group’s ability to generate higher income in the elevated interest rate environment, its retail diversification strategy to attract low-cost deposits, and the group maintaining its leadership position in cost management.

Zenith Bank and GTCO have a year-to-date (YTD) of 58.12% and 75% respectively, outperforming the NGX-ASI index’s 43.94%.

Nigeria banks who are the major drivers of earnings among NGXASI 30 firms have the most attractive valuation at an average of 3 times or 3x price to earnings ratio (P/E) ratio, which is an attractive entry point for investors who wish to magnify their earnings.

It is important to note that lenders offer an attractive return on equity as they have the highest dividend yield.

However, industry profit could take a hit in 2024 as the foreign exchange revaluation gains that jerked up the bottom line is expected to wane as there will not be abrupt devaluation of the currency.

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