Lucky Fiakpa
3 November 2008
(Page 2 of 2)
The bank posted an after tax profit of N36.54 billion during the year as against N20.64 billion recorded the previous year, an increase of 77 per cent. It was on the basis of this that the board proposed a dividend of N1.20 per share which was approved by the shareholders during the AGM in Abuja. And in line with the bank's commitment to grow shareholders' value, a bonus issue of one for every four ordinary shares held was also recommended by the board and was equally approved by the shareholders.
The bank's total assets and contingents closed at N2.08 trillion, representing an increase of 66 per cent over N1.25 billion posted in the corresponding period of the previous year.
Even at this, the bank's share price traded for N22.26 per share down from its 52 weeks high of N54.86, a drop of N32.60.
At the last annual general meeting of Oceanic Bank International Plc in Abuja, the managing director and chief executive officer, Dr. (Mrs.) Cecilia Ibru, told shareholders that the bank would not rest on its oars in its resolve to break new ground in the on-going efforts to build a stronger Nigeria. The managing director went further to assure investors of bumper returns at the end of the 2008 financial year.
The fourth quarter result of the bank just made public passed as a fulfillment of that promise.
Oceanic Bank recorded significant growth in all performance indicators for the year ended September 30 2008 with gross earnings hitting N150.9 billion, thus confirming its leading position in the Nigerian banking industry. According to the bank's un-audited results recently approved by the Nigerian Stock Exchange (NSE), gross earnings grew by 101 per cent compared to N74.94 billion recorded in the corresponding period in 2007.
Profit before tax (PBT) also grew sharply by 127 per cent to N52.23 billion in contrast to N23.01 billion posted at the preceding year. In like manner, the bank's profit after tax (PAT) increased significantly by 135 per cent to N41.24 billion when compared to N17.54 billion posted in 2007.
A total of N11 billion was paid as tax to the government indicating an increase of 101 percent over N5.47 billion paid the previous year. All of that notwithstanding, the bank's share sold for N15.17 per share last week from a peak of N39.05, down N23.88 per share.
Only last week, Union Bank made public its financial statement. It was also a success story. The bank recorded gross earnings increased N23.75 billion, from N89.24 billion in the year ending March 31, 2007, to N112.99 billion in the year under review. On this basis, profit before tax in the review period stood at N33.01 billion, an increase of N15.43 billion over N17.58 billion recorded in the corresponding period of the previous year.
The bank posted an after tax profit of N26.85 billion during the year as against N13.88 billion recorded the previous year, an increase of N12.97 billion. Apart from proposing a very attractive dividend to shareholders, the bank is also proposing a bonus of one new ordinary share of 50 kobo each for every six ordinary shares of 50 kobo each fully paid and registered in the names of such shareholders at the close of business on November 14, 2008. The bank's total assets closed at N1.13 trillion, up from N700.09 billion posted in the 2007 financial year.
This outstanding performance notwithstanding, the bank stock, which was recently let off from a technical suspension when it earlier gave its intention to float a public offer, sold for N33 per share from a height of N45.09, down by N12.09 per share.
Against this backdrop, therefore, Mr. Arnold Ekpe, the group managing director of the Ecobank Transnational Incorporated told Financial Vanguard in an interview in China, during the ECOWAS-China Economic Forum that the best time to buy into some of the banks cannot be better than now. "Isn't it the best time to buy when the price is down? You want to buy when the price is high? The market is not going to be down forever. If you wait for the market to go up you'll lose your chance. This is the time to buy," he said.
These banks downwards share price movement is without significant shifts in their operational and market fundamentals. In the thinking of Nwagbaraji, if any of these banks constitute part of an investor's core holding in his portfolio, "it will be full hardy to shun an opportunity to add to your holding".
As a long term investor, Nwagbaraji further said, "the individual investor should be fully aware of the cost of each share. Dividend payment should be measured as a percentage of the stock price. If a share is acquired at N50.00 and the annual dividend is two percent, it makes good investment sense to increase the number of shares held if the share price declines to N30.00 unless there are changes in the corporation's underlying fundamentals.
Implication of the Meltdown
The only fear expressed by the managing director and Chief Executive Officer of Union Bank of Nigeria Plc, Dr. Barth Ebong, was that the on-going global financial meltdown could have implications for some Nigerian banks.
As global players, which most Nigerian banks are, he said, what is happening in the global arena could possibly affect them. "Credit is becoming expensive than they were before the global financial crisis. The era of LIBOR + 1 and so on is gone. To that extent, for Nigerian banks that would depend on such loans for business would suffer some set back in their businesses," Ebong stated.
The implication is that Nigerian banks which had easy access to international credit a couple of months, or a year ago, will find it more difficult to get credit from international banks. Banks overseas that, on the surface, look healthy have every reason to be fearful after seeing venerable institutions like Bear Stearns, Lehman Brothers, Meryl Lynch, HBOS and Fortis close shop in the maelstrom that has hit global financial system.
Ebong however excluded Union Bank from the list of banks depending on foreign credits to do business. "We are strong, dependable and reliable. We always have enough money for our business. That is why we will not be affected by the global financial crisis," he said.
Generally, he said, subsidiaries of Nigerian banks abroad could be affected somehow "but not as much as the domestic banks in those countries," he stated.
While he said he could speak for other banks, he however noted that Union Bank, UK was not involved in the type of business that the domestic banks in those countries were involved in.
"We were not involved in the sub-prime business, which was really the cause of the whole crisis. We were still operating in our conservative banking culture," he said.
The post-consolidation period has exposed a lot of Nigerian banks to global practices. Not only did many entered into business relationships with some of the foreign banks that are badly affected by the crisis, a good number of them were reported to have booked considerable credits from such embattled financial institutions.
At the end of each financial year, some banks often access foreign credits to balance their books and since interest on such facilities are quite low, it makes sense for them to do so. But with the credit crunch and the prevailing relative high cost of funds abroad, where you get one, this may now be an expensive gambit.
Besides, other than Nigerian banks having limited access to international credit, all the big players from First Bank to GTBank may be exposed to the crisis overseas through their subsidiaries, albeit to a lesser extent. A former executive of GTBank was recently reported to have privately admitted that the value of the bank's Global Depository Receipts listed on the London Stock Exchange have been halved in the last few weeks. The same could have happened to UBA's GDR on the New York Stock Exchange.
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Every investment is risk taking. For now, those who invested in banks shares in Nigeria are facing hardtime occassioned by the current declining trend in Nigeria Stock Exchange Market. At moment, some of the banks' share price is less than the price of pure water in Nigeria, the situation means heavy loss for investors who want shortrun reward. Investors who want longrun reward will surely recoup in the longrun and make good profit from their investments. For those in shortrun,take hearth, while those in longrun should buy more to consolidate their share holdings in those banks.
I absolutely agree with the sentiments shared in this article on the timing to buying back in to the banking shares that slipped away from many investors reach during the banking consolidation frenzy.
The Nigerian banks with strong balance sheets and liquidity positions at their current prices are an absolute bargain if you an investor with a mid term to long term investment portfolio.
I see these very bargains screaming at me to get in on the action as I am NOT a short term speculator like a lot of inexperienced or even in some cases greedy nigerian investors only in it for the fast buck.
alot of them borrowed to the tilt from the banks in the first place and are now sitting on massive paper losses or even realised losses if they have now cashed in under liquidity pressure.
As for me I have not sold 1 units of my shares bought during the consolidation frenzy, and refuse to sell any, infact I can't waiting to get more cash pumped in to a selected few solid nigerian banks as soon as I have spare funds as i am prepared to wait for another 3 to 5 years to build up my portfolio then I will sell off and be laughing all the way to and bank and from the bank too to my house. hehehehe:)
To my nigeria brothers and sisters investing take your time don't rush in an haste, good things come to those who wait and are patient. :-)
Enuff said for the wise !. All the best and happy investing