Welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.
The newsletter is divided into two parts:
Green White Green is focused on the Nigerian stock market.
Star-Spangled Banner is focused on the US stock market
So why the title? “Amaka” is the title of a hit single by Tuface Idibia and Peruzzi. In the song, they narrated the story of a lady called Amaka, whom they had been expecting to pay a visit, but she did not come.
Similarly, GTCO (for good reason though) dashed the hearts of investors when it left its final dividend unchanged at N2.70. Its peers among the FUGAZ banks (UBA, Access and Zenith) all jacked up theirs. First Bank has yet to release theirs.
The reason?
You'd have to read on.
Green White Green Last Week
The NGX opened for two trading days last week as the federal government of Nigeria declared Tuesday Wednesday and Thursday (April 9–11, 2024), as public holidays to commemorate Eid al-Fitr celebration.
Exit of the sun?
The Tourist Company of Nigeria Plc (owners of Federal Palace Hotel) may have a new majority shareholder soon. Last month, TCN’s board received a letter from Sun International Limited, which holds a 49% stake notifying it of a proposed divestment of 43% of the shares held in The Tourist Company of Nigeria Plc to Rutam Finance Company (RFC), an associate of an existing shareholder, Oma Investment Limited.
In FY 23, the UBA Group made N2 trillion in revenue, up 143% from the N853 billion it made in FY 22. Profit after tax was N607 billion, up 256% from the N170 billion it made in FY 22.
The firm’s board has proposed a final dividend of N2.30 per share (FY 22 was N0.90 per share).
This proposed final dividend and the N0.50 interim dividend paid bring the total dividend for the year to N2.80.
So what led to the bump? You have the usual factors we have seen with bank numbers in Nigeria for FY 2023.
Higher interest income, trading income, and FX gains (derivative gains and foreign currency revaluation gains). Impairments (provisions for loans gone bad) are up sharply as banks use these gains to sanitise their balance sheets.
A total of N1 trillion or about 50% of revenue, came from interest income. Roughly half of this interest income came from interest on investment securities (treasury bills and bonds). Fair value gains on derivatives amounted to N457 billion.
Retail and commercial banking remains an Achilles heel for the group. They bring in the biggest chunk of money as revs, but are lagging in terms of profit. In FY 2023, it generated N625 billion in revenue, a profit before tax of N68.1 billion, and a N7.7 billion loss due to a spike in tax.
Zenith Bank FY 2023
Zenith Bank's gross earnings were up 125% from N945 billion in 2022 to N2 trillion in 2023. Interest income came in at about N1.1 trillion (N671 billion of that was interest income from loans and advances to customers).
Profit after tax rose by 202% from N223 billion in 2022 to N676 billion in 2023. A final dividend of N3.50 has been proposed, which in addition to the N0.50 interim dividend amounts to N4.00 per share. For FY 22, it paid a total of N3.20.
GTCO pulls an “Amaka”
GTCO dropped its FY 23 earnings last week. Gross earnings jumped by 120% from ₦539 billion in 2022 to ₦1.1 trillion in 2023. Profit after tax went up by 219%, from ₦169 billion in 2022 to ₦539.7 billion in 2023.
The firm, however, chose to disappoint like “Amaka” ( apologies to Tuface and Peruzzi) by leaving its final dividend flat at N2.70 (same as FY 2022). Group CEO, Segun Agbaje, gave some insight on the reason for that during the earnings call. He also spoke at length on other issues.
On the flat final dividend
"We had to restrict the dividend. CBN has a rule that states that if you have a forbearance loan, you are encouraged to retain profit. One major forbearance loan (we have) is Aiteo, which is ₦300 billion. It restricted the amount of dividends we could pay. Aiteo money has started coming in. If it has been properly restructured by half-year, we can take away the forbearance status and be a bit more bullish in our dividend payout."
Agbaje also spoke on a few other topics.
On recapitalisation
“I do believe the banks need capital. At year-end, the devaluation was over 100%. It meant (and it still means) that your ability to do business from a one-obligor perspective has diminished. For GT, at a point, we could do $300 million obligor (per borrower). After the devaluation, it dropped to as low as between $160 million and $180 million (currently, it is about $200 million). If you are planning for the next 5 years, unless you are in a no-growth scenario, whether the CBN asks you to raise capital or not, you'd have to raise so your deal sizes don't shrink. In this type of devaluation environment, there's no way you'd have kept the same capital and grown over the next 5 years. You would have shrunk in terms of business you can do.”
Green White Green This Week
Zenith Bank and Transcorp Power have earnings calls scheduled for this week.
A few more earnings could drop during the week.
Star-Spangled Banner Last Week
The S&P 500 index fell 2% following inflation numbers that came in "hotter" than expected. Higher inflation reduces the probability of the Fed (US Central Bank) cutting interest rates, which would be bullish for stocks.
The European Central Bank also held its rates unchanged, with President Lagarde stating the bank would be data-dependent in deciding when to cut rates.
Star-Spangled Banner This Week
There's the Iran vs Israel conflict. War typically leads to a flight to safe assets like bonds and gold. Stock prices could also dip if the conflict heats up. Goldman Sachs, Netflix Morgan Stanley, Rio Tinto among others will drop earnings.
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