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Monday, March 27, 2023

Zenith Bank Stock More Attractive Compared to Emerging/Frontier Market Peers

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It is cheaper for an investor to buy Zenith Bank Nigeria shares compared to peer rivals in emerging and frontier markets.

Zenith Bank has a price to earnings ratio of 3.36 times.

That is in stark contrast with Far East International Bank for Taiwan with  a P/E ratio of 15.63 times.

St Galler Kantonalbank AG, one the largest lenders in Switzerland trades at earnings multiple of 14.45 times.

EFG international Bank headquartered in Zurich presently trades at a price to earnings ratio of 11.35 times, while Sparebanken Vest, the Norwegian lender has a price to earning ratio of 10.25 times.

Buenos Aires lender Banco Macro SA is trading at price to earnings of 7.88 times while Indonesia Bank OCBC NISP Tbk PT has a P/E ratio of 7.02 times.

The attractive valuation and consistent earnings growth of Zenith Bank amid the punitive regulatory and low yield environment earned it buy ratings from investment houses across Nigeria.

It must be noted that the lender leapfrogged rival Guaranty Trust Holding Company to become the most capitalised lender.

Zenith is positioned to benefit the most from a Naira devaluation as its FCY stood at $1.40 billion in the second quarter.  It realised N15.42 billion in foreign exchange revaluation gains in the third, but this is 25.03 percent lower than 2020’s N20.57 billion.

It has a dividend yield of 12.67 percent- the highest among Nigeria banks-, which indicates it pays a substantial share of its profits in the form of dividend.

Despite the volatility in crude oil price that was exacerbated by the coronavirus pandemic that disrupted economic activities across the globe, Zenith Bank’s non-performing loans (NPLs) of 4.50 percent is lower than the regulatory threshold of 5.o percent.

The good asset quality is buoyed by excellent risk management strategy and efficient allocation of portfolio across sectors to mitigate shocks of the economy.

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