NIGERIA: Zenith, Access, UBA Get ‘Buy’ Recommendation

Zenith Bank Plc, Access Bank Plc and the United Bank for Africa Plc (UBA), are among five Nigerian banks that Exotix Limited has recommended to investors because of the banks’ valuations and growth potential.
“We strongly believe that now is the time to have a strong bias toward Nigerian banks,” an analyst at Exotix Frontier Equities, Kato Mukuru, said in an e-mailed note to clients obtained by Bloomberg.
“Nigeria also offers something that few sub-Saharan African banking systems can hope to offer – scale,” he added.
Almost half of Nigeria’s 170 million population don’t have access to finance, according to the Central Bank of Nigeria (CBN).
With loan penetration in the country increasing by only five per cent points over the past 10 years, the potential for asset growth in Nigeria is probably much larger than in other parts of the continent, said London-based Exotix, which started building an Africa equity team last year.
“Zenith may improve its return on equity to 22.4 per cent by 2017 from the 19.6 per cent that Nigeria’s third-largest bank by market value reported last year,” Exotix said.
According to Mukuru, Barclays Bank of Zimbabwe Limited, Standard Chartered Bank Ghana Limited and Ghana Commercial Bank Limited are also 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.
Mukuru added that  Ghanaian lenders 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 per cent in April.

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