BREAKING: FBNH, UBA, GTCO and Access Bank leave the trillion market cap club

Nigerian banks experienced a challenging April as all major banking stocks posted losses so far this month.

This slowdown coincided with the first monthly decline to date in the NGX All Share index of the year, which lost 6% in April of this year.

The most affected were the FUGAZ banks –First Bank, UBA, GTCO, Access Bank and Zenith–, although Zenith was the only one that maintained its position in the market. SWOOT (shares worth over one trillion naira) index.

As of December 2023, Nigeria’s largest banks had a total net asset value of 9.7 trillion naira, but only a combined market capitalization of 4.2 trillion naira ($1 billion), which is translates into a price-to-book ratio of 0.43, or 43%. .

This indicates that investors significantly undervalue banks compared to their book values.

The news continues after this announcement.

The news continues after this announcement.

Amid this, challenger banks like Opay and Kuda Bank are valued at more than $1 billion, despite their smaller operating scales.

Recommended reading: UBA surpasses trillion market capitalization

FUGAZ value falls

According to the Nairametrics SWOT index, in April, FBN Holdings, UBA, GTCO and Access Bank each fell below the trillion naira market capitalisation, a level they last surpassed in January when they briefly reached this milestone.

Bank Access: Since January, these banks have seen substantial drops in market capitalization.

  • For example, Access Bank, Nigeria’s largest bank by assets, last hit the trillion naira mark in late January.
  • By the end of April, its market capitalization had fallen to about N598.9 billion, despite having over N32 trillion in total assets and N2.5 trillion in net assets.

In the same way, the UBAwith total assets and net assets of N20.6 trillion and N2 trillion respectively, saw its market capitalization fall from over N1 trillion in January to N817.3 billion at the end of April.

FBN shares, Nigeria’s oldest bank saw its market capitalization peak at just over N1 trillion in early April, but fell to N857.8 billion on April 30, 2024.

GTCO also experienced a drop; Valued above N1 trillion as recently as April 26, it ended the month with a market capitalization of N962.3 billion.

zenith bench, however, it remained on the SWOT although it risks falling below if liquidations continue until May 2024. It has total and net assets of N20.3 trillion and N2.3 trillion respectively.

Why Nigerian banks are undervalued

Several factors contribute to these low valuations relative to net assets, despite consistent dividend payments.

  • Some analysts attribute this to the high liquidity of bank stocks, while others point to a general disinterest in the Nigerian stock market, suggesting that intrinsic values ​​of stocks are rarely achieved.
  • A more recent factor is the announcement of bank recapitalization by the apex bank, which requires banks to raise over N4 trillion in new capital.
  • This is likely to have led to a sell-off, as lower share prices benefit bank shareholders when the capital increase is via a rights issue.
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