Wednesday, December 17, 2014 5:14 PM / Chapel Hill Denham Research
We upgrade our recommendation on Diamond Bank Plc (Diamond) to a BUY from a Hold previously but maintain our 12-month target price (TP) of N6.72.
FY-15E outlook on Diamond remains unchanged.
We maintain our view that EPS will recover by 49.3% yoy to N1.63 in FY-15E as net interest margin recovers by 40bps to 7.4% and cost-to-income ratio improves by 258bps to 65.8% (see our report entitled Net interest margin remains under pressure published on 17 November 2014).
Notably, our forecasts imply a FY-15E ROAE of 16.9%, up from 14.5% in FY-14E.
We upgrade our recommendation to a BUY from a HOLD but maintain our 12-month TP of N6.72.
We believe the current share price is a good re-entry point following the sharp sell-off seen over the past month.
The stock has shed 32.0% YTD, worse than the NSE banking sector index and the NSE ASI that have shed 30.7% YTD and 27.9% YTD respectively.
Diamond currently trades on an FY-15E P/E and P/B of 3.1x and 0.5x a discount to our banking coverage average FY-15E P/E and P/B of 3.6x and 0.7x respectively.
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