MON. 12 DEC, 2022-theGBJournal| The year 2022 was an auspicious year for investors in the financial market. As the global economy came under significant pressure, the domestic financial market’s performance mostly tracked well with original expectations, with the variance stemming from the lower-than-expected yield rise.
For 2023FY, Cordros Research analysts believe Nigerian banks will maintain their growth trajectory supported by core income, owing to higher loans and investment securities yields.
”Although, we think banks will be cautious about growing loans domestically in 2023FY as the tight monetary conditions will likely limit risk asset creation,” Cordros says.
On the external front, Moody’s downgraded nine Nigerian bank’s long-term ratings recently based on the weakening in the Nigerian government’s fiscal capacity to support the country’s banks, and interlinkages between the sovereign’s weakened creditworthiness and the banks’ balance sheets, given the banks’ significant holdings of sovereign debt securities.
Although, we expect noncore income to support earnings in 2023FY, albeit marginal, as the price sharing and glitch on the e-banking platforms will continue to impact the performance.
In addition, this will negatively impact Nigerian banks looking to raise debt externally.
The top picks are (1) GTCO (BUY, TP: NGN28.21/s), as the company maintains a leadership position in operational efficiency, and (2) ZENITHBNK (BUY, TP: NGN26.91/s), given its dominance in the corporate and retail segments of the industry.
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