Thursday, August 18, 2016 6.18 PM / Taiwo Ologbon-ori
Technically, the shares of ZENITHBANK have been battling negative sentiments in recent weeks to post an 11.30% loss of its market value over the past 2weeks, with a corresponding steady decline in demand.
According to the observed volume pattern, this sell-down is mostly from short-term traders reducing their exposures accordingly, while the stock maintained a price range of N16.99 and N14.90kobo in the past 2weeks. The general sell-down on Big-CAPs by speculators could not be isolated from this pattern. Furthermore, the latest unimpressive earnings report of the bank played a role in the increased mixed sentiments towards the stock.
The bank's earnings report came with contractions across the board, key performance indicators had shown. Both top-line and bottom-line figures contracted by -6.23% and -15.68% respectively, taking hits from weakness in Net interest income, non-interest income and operating efficiency. The 97.64% surge in impairment charges had been attributed to a couple of obvious factors i.e. low oil price, the devaluation of the Naira and exposure to state bailout funds etc.
However, the stock at N15.00kobo is still a good buy for mid-term and long term investors. The stock has a strong potential to still trade above N20.00. Despite all the weaknesses noted above, the fundamentals of the bank remain healthy and strong, i.e. strong earnings capacity and a healthy and liquid capital base- The bank maintains strong market share with a 16% contribution to sector turnover so far for half-year 2016- strongly above the average 8% contribution in the sub-sector.
The bank's NPL (Non Performing Loan) ratio at 2.3% is far below the 5% regulatory benchmark- it reflects an insignificant exposure level. This further indicates that the bank has strong risk & assets management strategies, which are important, considering the mounting macroeconomic challenges and tough operating environment faced. Both liquid and capital adequacy ratios are above the regulatory threshold, these in all reflect healthy posture of the bank.
A conclusion from technical stand point, a price break below N14.44kobo may drive price lower to N12.30kobo as bearish sentiments may gain momentum anytime soon.
1. Zenith Bank Plc Outperform Rating Maintained Shares Up c.7 vs a Loss of -c.5 for the ASI
19. ZENITHBANK Grows Interest Income by 11.1 as Loan Loss Expense Spikes by 135 QoQ in Q4 15
23. ZENITHBANK Healthy upside potential even after mixed Q3 – Proshare