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Zenith Bank rises to four-month high on valuation

By The Citizen
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Zenith Bank Plc, the country's third-largest lender, rose to the highest level in four months as its valuation made it more attractive to investors, according to Renaissance Capital.

The lender gained two per cent to N22.06 in Lagos, the highest since June 12. About 110 million shares traded, or 5.7 times the three-month daily average, according to a Bloomberg report.

The stock is trading at a price-to-book value of 1.5 times, according to data compiled by Bloomberg.

Banking analyst at Renaissance Capital, Mr. Adesoji Solanke said, this was 'cheap compared to its peers in the Nigerian banking industry and emerging market banks.'

He added, 'We rate the stock a buy, at a target of N25.30'

The nation's largest lender, Guaranty Trust Bank Plc, has a price-to-book value of 2.7 times. Zenith looks attractive even as Renaissance Capital reduced its full-year 2013 estimated profit by seven per cent to N91bn ($569m), Solanke said.

Zenith Bank said on August 15 first-half net income was little changed at N45.4bn, compared with N42.4bn a year earlier, as the central bank ordered a reduction in fees changed by lenders. Revenue rose 13 per cent to N171bn

The Central Bank of Nigeria told banks in sub-Saharan Africa's second-biggest economy to lower fees and commissions starting April 1 to minimize conflict with clients.

The cash reserve requirement for federal, state and local government deposits was raised to 50 per cent from 12 per cent, the regulator said July 23.

Bigger banks like Zenith are more likely to withstand tight market conditions owing to the size of the balance sheet, Renaissance Capital said

Zenith Bank's shares have risen 13 per cent this year compared with a 20 per cent increase for the Nigerian Stock Exchange Banking Index, which tracks the 10 largest banks in Africa's biggest oil producer.