Quote:
Originally Posted by Babs_O
Senior member Pumping: I very much appreciate gentlemen debate as they say iron sharpen iron. As I now be member I need to sharpen up to become senior member too.
Simplistic Theory: That's how most great things get built up like the way Isaac Newton started the laws of Mechanics. Most Banks Raise more money to make them more profitable as this is the easiest path to growth especially if the money is deployed in such a way that it attracts more Money. You can see how it works from the following illustration. [If Bank A has 100 shares of N4 each, and Net Assets per share of N2. Its capitalization = N400 and Net Assets (or Shareholder Funds) =N200. Assuming average performance of net assets after Tax is 10% then PAT = N20, PE = 20 and P/B =2. Assuming instantly at beginning of its next year it pays all PAT as dividend and raises 50 more shares via a PO. And the performance of this new year remains same in utilization of assets then, this new year end performance will be Capitalization N 600, Net Assets N400, PAT N40, PE 15, P/B 1.5. The more the new capital injection relative to current capitalization, the more the improvement of PE and P/B assuming efficiency levels remain same.
UBA Brand Name / Solid Bank: See this thread.
[url="http://http://www.nairaland.com/nigeria/topic-104490.0.html"]
Sterling Bank, Ecobank, Unity Bank cannot be the hottest primarily on a price consideration. You need to look at full picture. P/E and PB will help you see better. I will quote these numbers according to IBTC research.
Bank #Shares PE P/B
Skyebank 7503044788 20 3.6
UBA 11290279980 17 2.6
Sterling 10552847632 76 ???
Ecobank 21654226926 48 5.9
Unity Bank 14736894670 39.6 4.4
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No senior member here jare. All we na d same.
Ha, you have gone in a dangerous direction o
. In case you don't know, I got my first degree in Mechanical Engineering and Isaac Newton is a popular bloke in my dictionary.
I sabi theorerize well well.
You are still doing the same thing which is not applicable in science or mathematics. Removing the assumptions without making any allowace for that and making a simplistic arguement.
I don't quote figures from IBTC or the like. I use my own and believe me, often this investment houses have wrong figures because they are not up to date. Did you read about the major investment house that listed the PE ratio of Crusader as 5 last December??
The PE ratio of Sterling Bank or Ecobank that you have listed above are definitely not correct.
Let me use Sterling Bank as an example.
Outstanding shares - 10.55B
Q-3 PAT - 2.46B
How can the PE ratio be 76?
For the records, it is around 23.42 and that of Ecobank is around 25.32.
Finally you have come full circle. What I am contesting is that the fact that a stock's nominal price is lower than that of another stock does not imply it has a better chance at capital appreciation. As you have said you need to look at the whole picture.
With reference to your thread on UBA, if you search well on nairaland, there is one for Zenith and another one for Oceanic as well complaining about their customer service or how they treat their staff. Junk.
I like to keep things very short and simple. Utilization of assets, net assets , shareholders funds etc, don't interest me so much though I am well versed in the implication of each item. Instead I deal with the end result of everything. Profit, Growth and corporate Governance.
I'm not going to let one spectucular Q-1 result for PO purchases cloud my eyes. This is a bank that grew PAT by 123% last year but in this quarter they have grown PAT by 242%. So we should expect a growth of 500% after their PO funds are applied by end of fiscal year 2008? Let's watch and see.