Hey Investors, It's Time to Bank!

Dear Speculators,

It's a happy New year for Nigerian banks. After getting hammered for most of 2015 and early 2016, the NSE banking index is now up 22.42 percent year-to-date and up 29.62 percent in the past one year. Why the renewed interest in banks? How about increasing supply of foreign currencies to banks, higher than usual interest rate, higher earnings expectation following the economic recession but most importantly, grossly undervalued bank stocks.

Currently most bank stocks are selling at a huge discount to book value even with the rapid stock price growth in the past year. The fall in the stock price of the banks was technically right reflecting the change in the economic fortunes of the country but fundamentally wrong in how low bearish investors were willing to sell these stocks.

At least now that investors are realising the value opportunity in banks, there is hope that in the not too distant future bank stocks will be trading closer to fair value. This stock play is Cliff Asness of AQR Capital Management favourite because it has both momentum and value attached to this trade. My advice is get in and buy wisely. Not all banks are great value for money but most banks right now are an excellent addition to your portfolio. Happy Shopping!

Emeka Ucheaga
Managing Partner
Emeka Ucheaga Advisory

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