Oct 24 (Lagos) - Some Banks have reported strong earnings for their third quarters such as the likes of GTB ( GUARANTY
last week and Zenith Bank ( ZENITHBANK
) this morning.
The gains are mostly as a result of depreciation of the Naira which the banks are able to record as a gain in their books. The tactic is not sustainable and shareholders will be worried about the stable or decreasing interest incomes and soaring operating expenses at various banks.
The T-Bill market offers investors return of 21.68% on the 1year maturity. That is one of the reasons investors will stay in the bond market at the moment with the attractive yields.
It is also the same reason banks will lend less because they can earn high ROI without taking any risk.
So expect a mild rally in bank stocks until they can prove that their ability to make money in this economic environment without the one time forex related gains.
Also banks should pay higher dividends to regain investors attention because north of 21% is available on a risk free basis right now in the bonds market.
reporting for easykobo.com on Monday, Oct 24 2016 from Lagos, Nigeria
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