Certain patterns or trends show bank stocks have rallied from July to October in the last three years, and it is obvious the same is going to happen this year, according to research house Chapel Hill Denham Limited.
While financial institutions such as Guaranty Trust (GTCO) Plc, United Bank for Africa (UBA), Access Corp, Zenith, and Fidelity have all obtained extensions to filing their results, analysts at Chapel Hill see the sector delivering an average gain of 15 percent.
Once audited results and accompanying corporate actions begin to emerge, particularly across large-cap banks, we expect attention to rotate back towards equities,” said analysts at Chapel Hill Denham.
“Historical performance lends support to this view. Using the NGX Banking Index as a proxy and considering that H1 results are typically released between July and October, the index has delivered an average gain of c.15% over this reporting window in the past three years,” said the analysts.
Of course, the accompanying interim dividend announcement after earnings results which are expected to be impressive have always been positive driver banking stocks. Of course, most sector players have been consistently paying dividends, and an attractive valuation as well as recent sell-off are an appropriate entry point for investors who like to buy when the market is down and sell when it is high.
Zenith has a price to earnings ratio of 5.02 times; AccessCorp, (2.31x); GTCO, (5.5x); UBA, (5.73x); Fidelity, (3.67x), Stanbic IBTC Holdings, (6.28x); WEMA, (1.12x), and FCMB, (1.38x).
“Assuming the average c.15% discussed above materialises post the announcement of banks’ earnings, we see the market with a YTD return of 80.47% sometime in Q4-26, somewhat consistent with our base case return of 79.47%,” summed analysts at Chapel Hill Denham.
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