Dec 31, 2010 and Q1 2011 Results Review Issued on
ISSN 1597 – – 8842 Vol.1 No. 72
Dec 31, 2010 and Q1 2011 Results Review Issued on July 26, 2011
Contents
Executive Summary
03
Fundamental Analysis
05
o Dec, 2010 and Q1, 2011 Financial Year End Results - Analysis & Review
Technical Analysis
15
o The Stock Price Performance at the NSE
The Analyst Opinion
17
ISSN 1597 – 8842 Vol.1 No. 72
Oceanic Equity Snapshot as at H1 2011
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Oceanic Equity Snapshot – July 2011 ISSN 1597 - 8842 Vol. 1 No. 72
Executive Summary The Oceanic Bank Plc closed quarter one 2011, period ended March 31st 2011 with mixed performance, considering the top-line and bottom-line positions amid meagre operational efficiency and remarkable NPL outlook in the face of falling deposit and loan growth in the period under review. https://www.proshareng.com/news/singleNews.php?id=13772 The bank recorded profit growth of 13.48% (YoY) to close at N1.90billion as against N1.67billion recorded in the previous year comparable period. A cursory look showed that the write back of N5.20billion impacted the PAT performance significantly. Also, the gross earnings performance disappointedly sustained the negative position at the end of the Q1 2011 to close lower again by -10.47% (YoY). However, this indicates improved performance when juxtaposed with -43.74% (YoY) recorded in Q4, 2010. The negative trend could be traced to lull in the industry coupled with the likely weak market perception together with degree of uncertainty towards the bank’s recapitalisation status. This performance came below our expectation as we expected the bank to improve the gross earnings outlook and sustain the outstanding PAT performance growth recorded recently, following the strong profitability position of N28.68billion with performance growth of 132% recorded in the last financial year end Q4, 2010. This further revealed negative performance growth of -93.37% (QoQ) when compared Q4, 2010 with Q1, 2011. This could be traced to a significant weakness witnessed in operating profit to close lower by 75% (QoQ). To this regard, we call attention of the management to this heavy shortfall in the operating profit of the bank. Nevertheless, we commend the management of the bank for sustained profitability outlook despite the uncertainty surrounded the recapitalisation deadline. On the other hand, a supplementary review of the financials of the bank revealed overall weaker performance as bank bagged more negative points in the face of improved profitability base and margins recorded on year on year performance. The deposit and loans recorded negative performance growth both on quarterly and yearly performance, the above mentioned reason of weak market perception could be a contributory factor to the declining trend in deposit position of the bank. The bank’s deposit declined marginally by -0.63% (YoY) to close at N605.90billion, a lower figure when compared with N658.17billion recorded in previous quarter Q4,2010, indicating -7.94% dip (QoQ). This trend was buttressed by falling trend witnessed in deposit to assets ratio which dipped from 67.62% to 61.10% which reflected in the low assets growth of 1.34% (QoQ) as against 2.95% witnessed in the previous quarter. The negative impact was much reflected in the loan growth which dipped by -34.74%- a weaker performance to a dip of -30.00% recorded in the previous year end. Meanwhile, further analysis revealed a dip of -33.09% and -6.77% recorded in both Q4, 2010 and Q1, 2011 respectively as buttressed by low LDR of 43.13% with falling deposit
Oceanic Equity Snapshot as at H1 2011
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growth- a signal to earning and liquidity threat. To this regard, we call attention of the management to the dwindling deposit to reinvigorate strategies towards deposit mobilisation. More so, the sustained negative trend in the operating profit of the bank despite -75% dip in the operating expenses gives us concern while the operating efficiency remained alarming with cost to income ratio of 117%, dropping from 118% recorded in the previous quarter- a meagre improvement on efficiency as noticed above which could be traced to poor cost management of the bank. In our opinion, the trend of poor cost management in the face of falling deposit and loan assets is not healthy for the going concern of the bank, we advise the bank to put this under proper control. On the final note, we commend the remarkable outlook of nonperforming loan recorded in the contact. The NPL closed lower at N48.78billion as against N621.45billion and N161.77billion recorded in Q1, 2010 and Q4, 2010 respectively. The NPL ratio also dropped to 16% from 41% recorded in the previous quarter- an outstanding performance when compared with 69% recorded in the previous year comparable period. The sales made to AMCON contributed to this outlook. Conclusively, the technical analysis revealed that as at July 20, 2011, Oceanic Bank Plc traded below its 20days, 50days and 200days moving averages of N1.33, N1.48, and N2.19 respectively, indicating bearish outlook in short and long term.
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2.
FUNDAMENTAL ANALYSIS
The Objective: To examine in a snapshot, the bank's financials and operations, especially earnings, growth potential, assets, debt, management, products, and competition through financial ratios arrived at by studying the balance sheet and profit & loss account over a number of years. This analysis is more effective in fulfilling long – term growth objectives of shares, rather than their short – term price fluctuations. In the Nigerian Stock Market, this has traditionally been the key focus of most players and it remains a guiding beacon as to what could possible happen to a stock. Our approach to fundamental analysis therefore takes into consideration only those variables that are directly related to the company itself, rather than the overall state of the market or technical analysis data, the former of which was reviewed in section above and the latter, a subject for review in section 3 below. The banking sector metrics below show the portraits of the sector based on the results announced so far. Peer Assessment Q1 Period Ended - March 31, 2011 Market Price Earnings Div EPS PE Ratio at July Yield Yield 08 7.00 0.23 29.93 3.34% 0.00%
Banks Access Bank Plc
PAT Margin
Shares in issue (M)
17.17%
17,888.25
Diamond Bank Plc
5.21
0.07
70.15
1.43%
0.00%
5.30%
14,475.24
Ecobank Plc
2.80
0.08
36.15
2.77%
0.00%
5.30%
13,879.00
FCMB PLC
6.90
0.03
259.89
0%
0.00%
3.20%
16,271.19
Fidelity Bank Plc
2.43
0.09
26.45
4%
0.00%
16.00%
28,974.80
First Bank Plc
12.49
0.04
287.43
0%
0.00%
26.50%
32,632.08
Guaranty Trust Bank Plc
15.04
0.54
27.89
4%
0.00%
19.88%
23,317.19
Intercontinental Bank Plc
1.01
0.86
1.18
85%
0.00%
34.62%
18,860.01
Oceanic Bank Plc
1.30
0.08
16.71
6%
0.00%
7.00%
24,444.00
Skye Bank Plc
7.30
0.29
24.90
4%
0.00%
13.74%
11,584.97
Stanbic IBTC Bank Plc
9.48
0.14
68.76
1%
0.00%
16.95%
18,750.00
Sterling Bank Plc
1.69
0%
0.00%
12.90%
UBA Plc
5.37
0.15
35.65
3%
0.00%
9.62%
25,867.75
Unity Bank Plc
0.91
0.02
44.39
2%
0.00%
6.38%
32,071.00
Wema Bank Plc
0.87
0.07
12.57
8%
0.00%
12.98%
12,821.00
Zenith Bank Plc
14.60
0.48
30.41
3%
0.00%
27.78%
31,396.49
Source: Proshare Research/Company Financials
No.
Bank
Quarter
Gross Earnings (N’ Ms)
Previous gross % Change earnings
PAT (N’M)
previous % Change PAT
1
Guaranty Trust Bank Plc
Q1
46,589
49,114
-5.14%
16,129
10,710
51.44%
2
Zenith Bank Plc
Q1
54,257
55,030
-1.40%
15,072
9,509
58.50%
Oceanic Equity Snapshot as at H1 2011
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3
Access Bank Plc
Q1
24,361
4
Stanbic IBTC Bank Plc
Q1
5
Diamond Bank Plc
Q1
6
Fidelity Bank Plc
Q1
5,351
7
FCMB PLC
Q1
16,634
8
Unity Bank Plc
Q1
10,311
9
Diamond Bank Plc
Q1
15,247 20,271
27,778 14,483
-12.30% 5.28%
24,464 -17.14% 14,167
4,183 2,585 1,075
4,020 2,588
4.05% -0.12%
1,527 -29.60%
-62.23%
1,418
1,505
-5.78%
14,439
15.20%
2,662
903.229
194.72%
8,955
15.10%
657.444
(2,596)
125.30%
20,271
-17.14%
1,075
-29.60%
10 Skye Bank Plc
Q1
24,721
25,133
-1.64%
3,397
11 Sterling Bank Plc
Q1
9,055
8,275
9.43%
1,168
1,272
-8.18%
12 First Bank Plc
Q1
63,261
1.38%
12,574
12,336
1.93%
13 UBA Plc
Q1
40,519
48,240
-16.01%
3,897
1,557
150.29%
14 Oceanic Bank Plc
Q1
27,173
30,351
-10.47%
1,902
1,676
13.48%
15 Ecobank Plc
Q1
13,480
13,703
-1.63%
432
1,071
-59.66%
16 Wema Bank Plc
Q1
887.369
675.760
31.31%
Oceanic Equity Snapshot as at H1 2011
62,399
6,835
www.proshareng.com
8,432
-18.94%
2,603
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30.50%
Oceanic BANK PLC
Mar 2011 N'Million
Mar 2010 N'Million
Variance
Cash and balances with CBN
26,967,029
47,351,523
-43.0%
Treasury bills
21,922,308
27,331,423
-19.8%
Due from other banks
89,163,410
74,762,693
19.3%
Short term investments
190,740,937
200,746,647
-5.0%
Loans and advances to customers
261,309,323
280,270,830
-6.8%
501,610
1,094,515
-54.2%
41,762,266
124,797,541
-66.5%
130,129,933
130,548,721
-0.3%
9,334,617
9,362,484
-0.3%
Other assets
162,166,193
22,556,145
618.9%
Fixed assets
57,713,564
59,775,133
-3.4%
991,711,190
978,597,655
1.3%
Customer deposits
605,907,508
658,169,406
-7.9%
Due to other banks
193,083,033
231,412,327
-16.6%
35,113,050
33,602,654
4.5%
2,526,942
2,508,815
0.7%
139,504,759
40,341,169
245.8%
28,382
18,051
57.2%
2,473,233
2,314,202
6.9%
CBN Convertible loan
100,000,000
100,000,000
0.0%
TOTAL LIABILITIES
1,078,636,908
1,068,366,624
1.0%
11,110,685
11,110,685
0.0%
BALANCE SHEET As 31 March 2011 Assets
Advances under finance lease Investment securities Deferred tax assets Investment properties
TOTAL ASSETS
LIABILITIES
Other borrowings Current income tax Other liabilities Deferred taxation Retirement benefit obligations
Equity Ordinary share capital
Oceanic Equity Snapshot as at H1 2011
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Other reserves
-97,617,448
-100,481,575
2.9%
Attributable to equity holders of the parent
-86,506,763
-89,370,890
3.2%
-418,955
-398,079
5.2%
Total Equity
-86,925,718
-89,768,969
-3.2%
Total equity and liabilities
991,711,190
978,597,655
1.3%
Contingent Liabilities & Commitments
59,032,293
59,452,739
-0.7%
Non-controlling interest
Source: Proshare Research/Company Financials
Oceanic BANK PLC Profit & Loss Accounts As 31 March 2011
12months to 31 Mar 2011 N'm
15months to 31 Mar Variance 2010 N'm
Gross Earnings
27,173,862
30,351,083
-10.47%
Interest and similar income
21,020,206
25,138,739
-16.38%
Interest Expense
-12,794,233
-17,993,370
28.89%
Net interest income
8,225,973
7,145,369
15.12%
Net fee and commission income
4,061,322
3,489,925
16.37%
Foreign exchange income
1,674,655
1,035,297
61.76%
Underwriting profit
343,291
545,253
-37.04%
Trusteeship income
3,413
2,129
60.31%
70,975
139,739
-49.21%
6,153,657
5,212,344
18.06%
Operating income
14,379,630
12,357,713
16.36%
Operating expenses
-16,882,642
-17,224,502
-1.98%
Operating margin
-2,503,012
-4,866,789
-48.57%
Write-backs for losses
5,206,786
7,428,205
-29.91%
Profit before tax
2,703,774
2,561,416
5.56%
Taxation
-801,011
-884,472
9.44%
Income from investments Other income
Oceanic Equity Snapshot as at H1 2011
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Profit after tax
1,902,763
1,676,944
13.47%
57,549
-8,376
787.07%
1,960,312
1,668,568
17.48%
48,781,768
621,456,323
-92.15%
16%
69%
-76.81%
EPS (Basic) in Kobo
9
8
12.50%
EPS (Diluted) in Kobo
9
8
12.50%
Non-controlling interest Profit attributable to the group
Key Financial information Total non-performing loans and advances Total non-performing loans to total loans and advances
Earnings per share (kobo):
Source: Proshare Research/Company Financials
04-Jan-10
31-Dec-10
% Change Jan 10 - Dec 10
20-Jul-11
% Change Jan10 -20 Jul 11
% Change Dec10 - 20 Jul 11
ACCESS
7.55
9.50
25.83%
6.46
-14.44%
-32.00%
AFRIBANK
2.43
2.18
-10.29%
0.89
-63.37%
-59.17%
DIAMONDBNK
7.19
7.50
4.31%
5.00
-30.46%
-33.33%
ECOBANK
10.10
3.60
-64.36%
2.80
-72.28%
-22.22%
FCMB
7.01
7.50
6.99%
5.90
-15.83%
-21.33%
FIDELITYBK
2.52
2.69
6.75%
2.25
-10.71%
-16.36%
FIRSTBANK
14.00
13.73
-1.93%
12.13
-13.36%
-11.65%
FIRSTINLND
0.55
0.73
32.73%
0.54
-1.82%
-26.03%
GUARANTY
15.78
17.76
12.55%
13.70
-13.18%
-22.86%
IBTC
7.16
9.20
28.49%
9.40
31.28%
2.17%
INTERCONT
1.69
2.16
27.81%
1.03
-39.05%
-52.31%
OCEANIC
1.77
2.50
41.24%
1.14
-35.59%
-54.40%
PLATINUM
1.38
1.75
26.81%
0.71
-48.55%
-59.43%
SKYEBANK
5.48
8.80
60.58%
6.00
9.49%
-31.82%
SPRINGBANK
0.73
0.91
24.66%
0.85
16.44%
-6.59%
STERLNBANK
1.26
2.31
83.33%
1.35
7.14%
-41.56%
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UBA
10.81
9.15
-15.36%
4.79
-55.69%
-47.65%
UBN
6.25
4.20
-32.80%
2.37
-62.08%
-43.57%
UNITYBNK
0.87
1.20
37.93%
0.81
-6.90%
-32.50%
WEMABANK
0.97
1.29
32.99%
0.91
-6.19%
-29.46%
ZENITHBANK
13.50
15.01
11.19%
14.66
8.59%
-2.33%
GENERAL COMMENTS AND OBSERVATIONS
Earnings Profile Oceanic Bank Plc sustained the negative trend in earnings outlook as the bank closed with lower gross earnings figure. The earnings dipped by -10.47% (YoY) when compared with Q1, 2010 to continue the falling earnings trend of -43.74% (YoY) witnessed in Q4, 2010 while recording -75.41%(QoQ) dip when compared with the previous quarter.
The falling trend in deposit and loan growth of the bank could be a contributory factor to this outlook while the weak performance recorded in income components impacted this outlook as well.
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The gross earnings closed lower at N27.17billion as against N30.35billion and N110.49 billion recorded in the Q1, 2010 and Q4, 2010 respectively. The decline of -16% (YoY) in interest income contributed to the gross earnings position, although the net interest closed with 15% (YoY).positive growth. More so, aside the weak market perception towards the bank, the unstable atmosphere in the industry could be traced to this trend as well. However, we advise the bank to leverage on the brand of the bank to reinvigorate the earnings assets.
Efficiency and Profitability The bank sustained the profitability outlook to close with 32.48% (YoY) PAT growth, though the outlook suggests lower performance when juxtapose with 132.22% (YoY) growth in Q4 2010. On the other hand, the bank recorded negative growth of -93.37% (QoQ) when compared with figures recorded in the previous quarter. We traced this to the dip of -75.16% (QoQ) in operating income.
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More so, the bank’s earnings per share recorded marginal positive growth to close at N0.09kobo as against N0.08kobo recorded in Q1, 2010. But a significant decline by -93% (QoQ) from N1.34kobo to N0.09kobo was observed when compared with previous quarter.
In the same view, the returns on equity of the bank remained negative to close at -2.19% as against -1.47% recorded in the Q1, 2010. Meanwhile, the return on assets closed marginally higher at 0.19% as against 0.18% recorded in the previous year comparable period. The continued negative position of net assets of the bank contributed to the outlook recorded.
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The operating efficiency of the bank is not encouraging with bloated cost to income ratio of 117%, though a meagre improvement was observed as the ratio dropped marginally from 118% recorded in the previous quarter. This outlook suggests poor cost management as we advise the bank to look into business segments or branches that are not contributing to bottom-line- this will allow the bank to curb the continuous operating expenses which usually exceed the operating income.
Margin Growth and Performances The bank maintained positive margins as both PBT and PAT margin closed positive in the face of growing expenses, though the significant decline in expenses witnessed in Q1, 2011 impacted the profit margin recorded.
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The PBT margin closed higher at 10% as against 8% recorded in Q1, 2010, similar trend witnessed in PAT margin to close higher marginally at 7% against 6% witnessed in the previous year comparable period.
Conversely, we observed the negative trend in the margin outlook when compared with the outlook recorded in Q4, 2010 as PBT & PAT margin closed with 30% and 26% margin performance respectively. This reflected the impressive profit recorded in the previous quarter. We therefore remained optimistic that the bank will sustain the profitability outlook while we advise the management to improve on operational efficiency.
Assets Quality Review The bank sustained negative net assets position to close at -N86.92billion but improved performance was observed as the net assets growth closed at 23.91% (YoY) when compared with –N114.23billion recorded in the previous year comparable period.
Similar trend of 3.17% performance growth was observed when compared with net assets position of –N89.76billion as at Q4, 2010. -This reveals strong and sustainable
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commitment towards improving the assets quality of the bank as the significant improvement recorded on nonperforming loans during the last financial year buttressed this view to close lower at N48.78billion as against N621.45billion recorded in the previous year comparable period.
More so, the bank recorded total assets growth of 5.76% (YoY), loans and advances contributed to this outlook significantly despite negative performance of -7.94% recorded in the quarter while this outlook was buttressed by decline in deposit to assets ratio to close at 61.10% as against 67.26%.
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Shareholders Fund outlook The shareholders’ fund of the bank remained in the negative position but experienced a significant improvement in the quarter to climb up from -17.12% dip to -3.17%- this could be traced to the improved outlook of the nonperforming loan. This further revealed the strong comittment of the management towards reviving the shareholders fund while we commend this impressive improvement.
The shareholders’ fund recorded 23.91% (YoY) positive performance growth when compared with figures recorded in the previous year comparable period. The shareholders’ fund of the bank stood at -N114.23billion in Q1 2010 and positively closed lower at – N89.92billion as at end of Q1, 2011.
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A similar performance was observed in the previous quarter to close with 22.56% (YoY) positive growth when compared the –N89.76billion recorded in Q4, 2010 with –N115.92 billion recorded in the preceeding year comparable period.- the sustained positive growth is commendable. Conclusively. We suggest that the bank should reinvigorate business segments or subsidiaries that are not adding value to bottom-line. This in our opinion will go a long way in boosting the gross earnings and deposit, improve loan book and the operational efficiency and of course increase the returns on assets and equity (shareholders fund) accordingly.
Technical Analysis Review MOST RECENT STOCK PERFORMANCE OF OCEANIC BANK PLC SHARES
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Oceanic Bank Plc in the last nineteen months January 4th, 2010 to July 20th, 2011, the bank share price recorded -35.59% depreciations to close at N1.14 from N1.77 it closed at the end of January 4th, 2010 trading session. With this trend, Oceanic Bank Plc has decreased in value significantly. In the year 2010 alone, the share price of the bank closed with +41.24% appreciation, as against +18.87% appreciations recorded in the entire market in the period. This positive performance showed that the bank has marginally recovered in the period under review after the general bearish trend of the market in 2009 coupled with the shake up in the banking sector from August 14th, 2009. However, the year to date performance as at July 20, 2011 stood at -54.40% while market performance also closed negative at -4.69% The trend so far in the price movement of the shares of the bank in the current year 2011 shows that the share of Oceanic Bank Plc is one of the low performing stocks in the sector. THE ASI AND Oceanic Bank PLC The All-Share Index and Oceanic Bank Plc share price experienced series of volatility as they traded sideways. However, Oceanic Bank Plc share recorded impressive performance in the year 2010 as ASI closed with +18.87% appreciation while Oceanic Bank share price recorded +41.24% gain. More so, Oceanic Bank Plc year to date performance closed negative at -54.40% (July 20, 2011) as against negative performance of entire capital market at -4.69%.
As illustrated from the graph below, Oceanic Bank Plc traded below its 20days, 50days and 200days moving averages of N1.33, N1.48, and N2.19 respectively.
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Technically, Oceanic Bank Plc share is trading below its 20days, 50days and 200days moving averages seem to suggest bearish outlook in short and long term.
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Analyst Opinion Oceanic Bank Plc recorded impressive and commendable performances during the quarter which gave credence to sustained effort towards returning the bank to strong profitability base and healthy net assets base. Aside the sustained profitability trends, some of the takeaways are; the commendable shareholders' fund growth from -17.12% to -3.17%its which revealed strong commitment of the management towards reviving the battered net assets posture. To buttress this, we also commend the outstanding improvement witnessed in the nonperforming loans of the bank to close lower at N48.78billion as against N621.45billion and N161.77billion recorded in Q1, 2010 and Q4, 2010 respectively. However, we call attention of the management towards the falling trend observed in the deposit growth which is likely to affect the earnings and liquidity position of the bank as the LDR appeared feeble in the face of negative posture of loan book. Conclusively, we advise the management of the bank to reinvigorate strategies towards deposit mobilisation and look into branches or business segments that are not profitablethis in our opinion will improve the operational efficiency, reduce the huge cost considerably and of course have positive impact on ROE and ROA.
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Dec 31, 2010 and Q1 2011 Results Review Issued on July 26, 2011
Contents
Executive Summary
03
Fundamental Analysis
05
o Dec, 2010 and Q1, 2011 Financial Year End Results - Analysis & Review
Technical Analysis
15
o The Stock Price Performance at the NSE
The Analyst Opinion
17
ISSN 1597 – 8842 Vol.1 No. 72
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Oceanic Equity Snapshot – July 2011 ISSN 1597 - 8842 Vol. 1 No. 72
Executive Summary The Oceanic Bank Plc closed quarter one 2011, period ended March 31st 2011 with mixed performance, considering the top-line and bottom-line positions amid meagre operational efficiency and remarkable NPL outlook in the face of falling deposit and loan growth in the period under review. https://www.proshareng.com/news/singleNews.php?id=13772 The bank recorded profit growth of 13.48% (YoY) to close at N1.90billion as against N1.67billion recorded in the previous year comparable period. A cursory look showed that the write back of N5.20billion impacted the PAT performance significantly. Also, the gross earnings performance disappointedly sustained the negative position at the end of the Q1 2011 to close lower again by -10.47% (YoY). However, this indicates improved performance when juxtaposed with -43.74% (YoY) recorded in Q4, 2010. The negative trend could be traced to lull in the industry coupled with the likely weak market perception together with degree of uncertainty towards the bank’s recapitalisation status. This performance came below our expectation as we expected the bank to improve the gross earnings outlook and sustain the outstanding PAT performance growth recorded recently, following the strong profitability position of N28.68billion with performance growth of 132% recorded in the last financial year end Q4, 2010. This further revealed negative performance growth of -93.37% (QoQ) when compared Q4, 2010 with Q1, 2011. This could be traced to a significant weakness witnessed in operating profit to close lower by 75% (QoQ). To this regard, we call attention of the management to this heavy shortfall in the operating profit of the bank. Nevertheless, we commend the management of the bank for sustained profitability outlook despite the uncertainty surrounded the recapitalisation deadline. On the other hand, a supplementary review of the financials of the bank revealed overall weaker performance as bank bagged more negative points in the face of improved profitability base and margins recorded on year on year performance. The deposit and loans recorded negative performance growth both on quarterly and yearly performance, the above mentioned reason of weak market perception could be a contributory factor to the declining trend in deposit position of the bank. The bank’s deposit declined marginally by -0.63% (YoY) to close at N605.90billion, a lower figure when compared with N658.17billion recorded in previous quarter Q4,2010, indicating -7.94% dip (QoQ). This trend was buttressed by falling trend witnessed in deposit to assets ratio which dipped from 67.62% to 61.10% which reflected in the low assets growth of 1.34% (QoQ) as against 2.95% witnessed in the previous quarter. The negative impact was much reflected in the loan growth which dipped by -34.74%- a weaker performance to a dip of -30.00% recorded in the previous year end. Meanwhile, further analysis revealed a dip of -33.09% and -6.77% recorded in both Q4, 2010 and Q1, 2011 respectively as buttressed by low LDR of 43.13% with falling deposit
Oceanic Equity Snapshot as at H1 2011
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growth- a signal to earning and liquidity threat. To this regard, we call attention of the management to the dwindling deposit to reinvigorate strategies towards deposit mobilisation. More so, the sustained negative trend in the operating profit of the bank despite -75% dip in the operating expenses gives us concern while the operating efficiency remained alarming with cost to income ratio of 117%, dropping from 118% recorded in the previous quarter- a meagre improvement on efficiency as noticed above which could be traced to poor cost management of the bank. In our opinion, the trend of poor cost management in the face of falling deposit and loan assets is not healthy for the going concern of the bank, we advise the bank to put this under proper control. On the final note, we commend the remarkable outlook of nonperforming loan recorded in the contact. The NPL closed lower at N48.78billion as against N621.45billion and N161.77billion recorded in Q1, 2010 and Q4, 2010 respectively. The NPL ratio also dropped to 16% from 41% recorded in the previous quarter- an outstanding performance when compared with 69% recorded in the previous year comparable period. The sales made to AMCON contributed to this outlook. Conclusively, the technical analysis revealed that as at July 20, 2011, Oceanic Bank Plc traded below its 20days, 50days and 200days moving averages of N1.33, N1.48, and N2.19 respectively, indicating bearish outlook in short and long term.
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2.
FUNDAMENTAL ANALYSIS
The Objective: To examine in a snapshot, the bank's financials and operations, especially earnings, growth potential, assets, debt, management, products, and competition through financial ratios arrived at by studying the balance sheet and profit & loss account over a number of years. This analysis is more effective in fulfilling long – term growth objectives of shares, rather than their short – term price fluctuations. In the Nigerian Stock Market, this has traditionally been the key focus of most players and it remains a guiding beacon as to what could possible happen to a stock. Our approach to fundamental analysis therefore takes into consideration only those variables that are directly related to the company itself, rather than the overall state of the market or technical analysis data, the former of which was reviewed in section above and the latter, a subject for review in section 3 below. The banking sector metrics below show the portraits of the sector based on the results announced so far. Peer Assessment Q1 Period Ended - March 31, 2011 Market Price Earnings Div EPS PE Ratio at July Yield Yield 08 7.00 0.23 29.93 3.34% 0.00%
Banks Access Bank Plc
PAT Margin
Shares in issue (M)
17.17%
17,888.25
Diamond Bank Plc
5.21
0.07
70.15
1.43%
0.00%
5.30%
14,475.24
Ecobank Plc
2.80
0.08
36.15
2.77%
0.00%
5.30%
13,879.00
FCMB PLC
6.90
0.03
259.89
0%
0.00%
3.20%
16,271.19
Fidelity Bank Plc
2.43
0.09
26.45
4%
0.00%
16.00%
28,974.80
First Bank Plc
12.49
0.04
287.43
0%
0.00%
26.50%
32,632.08
Guaranty Trust Bank Plc
15.04
0.54
27.89
4%
0.00%
19.88%
23,317.19
Intercontinental Bank Plc
1.01
0.86
1.18
85%
0.00%
34.62%
18,860.01
Oceanic Bank Plc
1.30
0.08
16.71
6%
0.00%
7.00%
24,444.00
Skye Bank Plc
7.30
0.29
24.90
4%
0.00%
13.74%
11,584.97
Stanbic IBTC Bank Plc
9.48
0.14
68.76
1%
0.00%
16.95%
18,750.00
Sterling Bank Plc
1.69
0%
0.00%
12.90%
UBA Plc
5.37
0.15
35.65
3%
0.00%
9.62%
25,867.75
Unity Bank Plc
0.91
0.02
44.39
2%
0.00%
6.38%
32,071.00
Wema Bank Plc
0.87
0.07
12.57
8%
0.00%
12.98%
12,821.00
Zenith Bank Plc
14.60
0.48
30.41
3%
0.00%
27.78%
31,396.49
Source: Proshare Research/Company Financials
No.
Bank
Quarter
Gross Earnings (N’ Ms)
Previous gross % Change earnings
PAT (N’M)
previous % Change PAT
1
Guaranty Trust Bank Plc
Q1
46,589
49,114
-5.14%
16,129
10,710
51.44%
2
Zenith Bank Plc
Q1
54,257
55,030
-1.40%
15,072
9,509
58.50%
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3
Access Bank Plc
Q1
24,361
4
Stanbic IBTC Bank Plc
Q1
5
Diamond Bank Plc
Q1
6
Fidelity Bank Plc
Q1
5,351
7
FCMB PLC
Q1
16,634
8
Unity Bank Plc
Q1
10,311
9
Diamond Bank Plc
Q1
15,247 20,271
27,778 14,483
-12.30% 5.28%
24,464 -17.14% 14,167
4,183 2,585 1,075
4,020 2,588
4.05% -0.12%
1,527 -29.60%
-62.23%
1,418
1,505
-5.78%
14,439
15.20%
2,662
903.229
194.72%
8,955
15.10%
657.444
(2,596)
125.30%
20,271
-17.14%
1,075
-29.60%
10 Skye Bank Plc
Q1
24,721
25,133
-1.64%
3,397
11 Sterling Bank Plc
Q1
9,055
8,275
9.43%
1,168
1,272
-8.18%
12 First Bank Plc
Q1
63,261
1.38%
12,574
12,336
1.93%
13 UBA Plc
Q1
40,519
48,240
-16.01%
3,897
1,557
150.29%
14 Oceanic Bank Plc
Q1
27,173
30,351
-10.47%
1,902
1,676
13.48%
15 Ecobank Plc
Q1
13,480
13,703
-1.63%
432
1,071
-59.66%
16 Wema Bank Plc
Q1
887.369
675.760
31.31%
Oceanic Equity Snapshot as at H1 2011
62,399
6,835
www.proshareng.com
8,432
-18.94%
2,603
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30.50%
Oceanic BANK PLC
Mar 2011 N'Million
Mar 2010 N'Million
Variance
Cash and balances with CBN
26,967,029
47,351,523
-43.0%
Treasury bills
21,922,308
27,331,423
-19.8%
Due from other banks
89,163,410
74,762,693
19.3%
Short term investments
190,740,937
200,746,647
-5.0%
Loans and advances to customers
261,309,323
280,270,830
-6.8%
501,610
1,094,515
-54.2%
41,762,266
124,797,541
-66.5%
130,129,933
130,548,721
-0.3%
9,334,617
9,362,484
-0.3%
Other assets
162,166,193
22,556,145
618.9%
Fixed assets
57,713,564
59,775,133
-3.4%
991,711,190
978,597,655
1.3%
Customer deposits
605,907,508
658,169,406
-7.9%
Due to other banks
193,083,033
231,412,327
-16.6%
35,113,050
33,602,654
4.5%
2,526,942
2,508,815
0.7%
139,504,759
40,341,169
245.8%
28,382
18,051
57.2%
2,473,233
2,314,202
6.9%
CBN Convertible loan
100,000,000
100,000,000
0.0%
TOTAL LIABILITIES
1,078,636,908
1,068,366,624
1.0%
11,110,685
11,110,685
0.0%
BALANCE SHEET As 31 March 2011 Assets
Advances under finance lease Investment securities Deferred tax assets Investment properties
TOTAL ASSETS
LIABILITIES
Other borrowings Current income tax Other liabilities Deferred taxation Retirement benefit obligations
Equity Ordinary share capital
Oceanic Equity Snapshot as at H1 2011
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Other reserves
-97,617,448
-100,481,575
2.9%
Attributable to equity holders of the parent
-86,506,763
-89,370,890
3.2%
-418,955
-398,079
5.2%
Total Equity
-86,925,718
-89,768,969
-3.2%
Total equity and liabilities
991,711,190
978,597,655
1.3%
Contingent Liabilities & Commitments
59,032,293
59,452,739
-0.7%
Non-controlling interest
Source: Proshare Research/Company Financials
Oceanic BANK PLC Profit & Loss Accounts As 31 March 2011
12months to 31 Mar 2011 N'm
15months to 31 Mar Variance 2010 N'm
Gross Earnings
27,173,862
30,351,083
-10.47%
Interest and similar income
21,020,206
25,138,739
-16.38%
Interest Expense
-12,794,233
-17,993,370
28.89%
Net interest income
8,225,973
7,145,369
15.12%
Net fee and commission income
4,061,322
3,489,925
16.37%
Foreign exchange income
1,674,655
1,035,297
61.76%
Underwriting profit
343,291
545,253
-37.04%
Trusteeship income
3,413
2,129
60.31%
70,975
139,739
-49.21%
6,153,657
5,212,344
18.06%
Operating income
14,379,630
12,357,713
16.36%
Operating expenses
-16,882,642
-17,224,502
-1.98%
Operating margin
-2,503,012
-4,866,789
-48.57%
Write-backs for losses
5,206,786
7,428,205
-29.91%
Profit before tax
2,703,774
2,561,416
5.56%
Taxation
-801,011
-884,472
9.44%
Income from investments Other income
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Profit after tax
1,902,763
1,676,944
13.47%
57,549
-8,376
787.07%
1,960,312
1,668,568
17.48%
48,781,768
621,456,323
-92.15%
16%
69%
-76.81%
EPS (Basic) in Kobo
9
8
12.50%
EPS (Diluted) in Kobo
9
8
12.50%
Non-controlling interest Profit attributable to the group
Key Financial information Total non-performing loans and advances Total non-performing loans to total loans and advances
Earnings per share (kobo):
Source: Proshare Research/Company Financials
04-Jan-10
31-Dec-10
% Change Jan 10 - Dec 10
20-Jul-11
% Change Jan10 -20 Jul 11
% Change Dec10 - 20 Jul 11
ACCESS
7.55
9.50
25.83%
6.46
-14.44%
-32.00%
AFRIBANK
2.43
2.18
-10.29%
0.89
-63.37%
-59.17%
DIAMONDBNK
7.19
7.50
4.31%
5.00
-30.46%
-33.33%
ECOBANK
10.10
3.60
-64.36%
2.80
-72.28%
-22.22%
FCMB
7.01
7.50
6.99%
5.90
-15.83%
-21.33%
FIDELITYBK
2.52
2.69
6.75%
2.25
-10.71%
-16.36%
FIRSTBANK
14.00
13.73
-1.93%
12.13
-13.36%
-11.65%
FIRSTINLND
0.55
0.73
32.73%
0.54
-1.82%
-26.03%
GUARANTY
15.78
17.76
12.55%
13.70
-13.18%
-22.86%
IBTC
7.16
9.20
28.49%
9.40
31.28%
2.17%
INTERCONT
1.69
2.16
27.81%
1.03
-39.05%
-52.31%
OCEANIC
1.77
2.50
41.24%
1.14
-35.59%
-54.40%
PLATINUM
1.38
1.75
26.81%
0.71
-48.55%
-59.43%
SKYEBANK
5.48
8.80
60.58%
6.00
9.49%
-31.82%
SPRINGBANK
0.73
0.91
24.66%
0.85
16.44%
-6.59%
STERLNBANK
1.26
2.31
83.33%
1.35
7.14%
-41.56%
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UBA
10.81
9.15
-15.36%
4.79
-55.69%
-47.65%
UBN
6.25
4.20
-32.80%
2.37
-62.08%
-43.57%
UNITYBNK
0.87
1.20
37.93%
0.81
-6.90%
-32.50%
WEMABANK
0.97
1.29
32.99%
0.91
-6.19%
-29.46%
ZENITHBANK
13.50
15.01
11.19%
14.66
8.59%
-2.33%
GENERAL COMMENTS AND OBSERVATIONS
Earnings Profile Oceanic Bank Plc sustained the negative trend in earnings outlook as the bank closed with lower gross earnings figure. The earnings dipped by -10.47% (YoY) when compared with Q1, 2010 to continue the falling earnings trend of -43.74% (YoY) witnessed in Q4, 2010 while recording -75.41%(QoQ) dip when compared with the previous quarter.
The falling trend in deposit and loan growth of the bank could be a contributory factor to this outlook while the weak performance recorded in income components impacted this outlook as well.
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The gross earnings closed lower at N27.17billion as against N30.35billion and N110.49 billion recorded in the Q1, 2010 and Q4, 2010 respectively. The decline of -16% (YoY) in interest income contributed to the gross earnings position, although the net interest closed with 15% (YoY).positive growth. More so, aside the weak market perception towards the bank, the unstable atmosphere in the industry could be traced to this trend as well. However, we advise the bank to leverage on the brand of the bank to reinvigorate the earnings assets.
Efficiency and Profitability The bank sustained the profitability outlook to close with 32.48% (YoY) PAT growth, though the outlook suggests lower performance when juxtapose with 132.22% (YoY) growth in Q4 2010. On the other hand, the bank recorded negative growth of -93.37% (QoQ) when compared with figures recorded in the previous quarter. We traced this to the dip of -75.16% (QoQ) in operating income.
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More so, the bank’s earnings per share recorded marginal positive growth to close at N0.09kobo as against N0.08kobo recorded in Q1, 2010. But a significant decline by -93% (QoQ) from N1.34kobo to N0.09kobo was observed when compared with previous quarter.
In the same view, the returns on equity of the bank remained negative to close at -2.19% as against -1.47% recorded in the Q1, 2010. Meanwhile, the return on assets closed marginally higher at 0.19% as against 0.18% recorded in the previous year comparable period. The continued negative position of net assets of the bank contributed to the outlook recorded.
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The operating efficiency of the bank is not encouraging with bloated cost to income ratio of 117%, though a meagre improvement was observed as the ratio dropped marginally from 118% recorded in the previous quarter. This outlook suggests poor cost management as we advise the bank to look into business segments or branches that are not contributing to bottom-line- this will allow the bank to curb the continuous operating expenses which usually exceed the operating income.
Margin Growth and Performances The bank maintained positive margins as both PBT and PAT margin closed positive in the face of growing expenses, though the significant decline in expenses witnessed in Q1, 2011 impacted the profit margin recorded.
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The PBT margin closed higher at 10% as against 8% recorded in Q1, 2010, similar trend witnessed in PAT margin to close higher marginally at 7% against 6% witnessed in the previous year comparable period.
Conversely, we observed the negative trend in the margin outlook when compared with the outlook recorded in Q4, 2010 as PBT & PAT margin closed with 30% and 26% margin performance respectively. This reflected the impressive profit recorded in the previous quarter. We therefore remained optimistic that the bank will sustain the profitability outlook while we advise the management to improve on operational efficiency.
Assets Quality Review The bank sustained negative net assets position to close at -N86.92billion but improved performance was observed as the net assets growth closed at 23.91% (YoY) when compared with –N114.23billion recorded in the previous year comparable period.
Similar trend of 3.17% performance growth was observed when compared with net assets position of –N89.76billion as at Q4, 2010. -This reveals strong and sustainable
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commitment towards improving the assets quality of the bank as the significant improvement recorded on nonperforming loans during the last financial year buttressed this view to close lower at N48.78billion as against N621.45billion recorded in the previous year comparable period.
More so, the bank recorded total assets growth of 5.76% (YoY), loans and advances contributed to this outlook significantly despite negative performance of -7.94% recorded in the quarter while this outlook was buttressed by decline in deposit to assets ratio to close at 61.10% as against 67.26%.
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Shareholders Fund outlook The shareholders’ fund of the bank remained in the negative position but experienced a significant improvement in the quarter to climb up from -17.12% dip to -3.17%- this could be traced to the improved outlook of the nonperforming loan. This further revealed the strong comittment of the management towards reviving the shareholders fund while we commend this impressive improvement.
The shareholders’ fund recorded 23.91% (YoY) positive performance growth when compared with figures recorded in the previous year comparable period. The shareholders’ fund of the bank stood at -N114.23billion in Q1 2010 and positively closed lower at – N89.92billion as at end of Q1, 2011.
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A similar performance was observed in the previous quarter to close with 22.56% (YoY) positive growth when compared the –N89.76billion recorded in Q4, 2010 with –N115.92 billion recorded in the preceeding year comparable period.- the sustained positive growth is commendable. Conclusively. We suggest that the bank should reinvigorate business segments or subsidiaries that are not adding value to bottom-line. This in our opinion will go a long way in boosting the gross earnings and deposit, improve loan book and the operational efficiency and of course increase the returns on assets and equity (shareholders fund) accordingly.
Technical Analysis Review MOST RECENT STOCK PERFORMANCE OF OCEANIC BANK PLC SHARES
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Oceanic Bank Plc in the last nineteen months January 4th, 2010 to July 20th, 2011, the bank share price recorded -35.59% depreciations to close at N1.14 from N1.77 it closed at the end of January 4th, 2010 trading session. With this trend, Oceanic Bank Plc has decreased in value significantly. In the year 2010 alone, the share price of the bank closed with +41.24% appreciation, as against +18.87% appreciations recorded in the entire market in the period. This positive performance showed that the bank has marginally recovered in the period under review after the general bearish trend of the market in 2009 coupled with the shake up in the banking sector from August 14th, 2009. However, the year to date performance as at July 20, 2011 stood at -54.40% while market performance also closed negative at -4.69% The trend so far in the price movement of the shares of the bank in the current year 2011 shows that the share of Oceanic Bank Plc is one of the low performing stocks in the sector. THE ASI AND Oceanic Bank PLC The All-Share Index and Oceanic Bank Plc share price experienced series of volatility as they traded sideways. However, Oceanic Bank Plc share recorded impressive performance in the year 2010 as ASI closed with +18.87% appreciation while Oceanic Bank share price recorded +41.24% gain. More so, Oceanic Bank Plc year to date performance closed negative at -54.40% (July 20, 2011) as against negative performance of entire capital market at -4.69%.
As illustrated from the graph below, Oceanic Bank Plc traded below its 20days, 50days and 200days moving averages of N1.33, N1.48, and N2.19 respectively.
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Technically, Oceanic Bank Plc share is trading below its 20days, 50days and 200days moving averages seem to suggest bearish outlook in short and long term.
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Analyst Opinion Oceanic Bank Plc recorded impressive and commendable performances during the quarter which gave credence to sustained effort towards returning the bank to strong profitability base and healthy net assets base. Aside the sustained profitability trends, some of the takeaways are; the commendable shareholders' fund growth from -17.12% to -3.17%its which revealed strong commitment of the management towards reviving the battered net assets posture. To buttress this, we also commend the outstanding improvement witnessed in the nonperforming loans of the bank to close lower at N48.78billion as against N621.45billion and N161.77billion recorded in Q1, 2010 and Q4, 2010 respectively. However, we call attention of the management towards the falling trend observed in the deposit growth which is likely to affect the earnings and liquidity position of the bank as the LDR appeared feeble in the face of negative posture of loan book. Conclusively, we advise the management of the bank to reinvigorate strategies towards deposit mobilisation and look into branches or business segments that are not profitablethis in our opinion will improve the operational efficiency, reduce the huge cost considerably and of course have positive impact on ROE and ROA.
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