Nigeria’s largest lenders are trading at discounts to the value on their balance sheets, opening a window of opportunity for savvy investors to buy cheaply.
One of the country’s largest banks, United Bank for Africa (UBA), offers the most recent example of this.
UBA’s rights issue– extended to Sept. 19 to give shareholders extra time to subscribe – is priced at N50 per new share. But the bank’s stock has been trading below that level, underscoring a gap between market sentiment and what the business is worth.
UBA’s stock closed at N48.70 on Friday. It has traded lower than N50 since the rights issues opened to shareholders in July.
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A rights issue price is typically lower than the market price as it is a way of giving shares back to shareholders at a discount compared to what non-existing shareholders will pay.
Access Holdings Plc used a similar playbook last year when it priced its rights issue above market in July 2024, drawing initial pushback.
But Aigboje Aig-Imoukhuede, the chairman, argued that strong earnings supported the higher valuation. He was proved right: Access shares have rallied 35 percent to N26.80, from N19.75 at the time of the offer.
Bank stocks are up some 41 percent this year but several big names are still trading below their book value, leaving the door open to more bargain hunting for investors.
Price-to-book (P/B) is a quick way for investors to check if a bank is trading cheaply compared to the value of its assets and equity.
By that measure, Nigeria’s biggest banks look heavily discounted. Access Holdings trades at about 0.40 times book value, UBA at 0.45, FBN Holdings at 0.47, Zenith Bank at 0.60, while GTCO is the outlier at 1.08, even though it is still modest compared with regional peers.
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The undervaluation story extends beyond banks to Nigerian stocks more broadly, where the average price-to-earnings (P/E) ratio – another measure of valuation – stands at just 7.3 times earnings. That’s cheaper than South Africa at 15.14 times, Kenya at 7.57, and Egypt at 7.88. The gap is even wider compared with global benchmarks. The frontier markets average is 10.60 times, while the emerging market average is 15.51 times, and developed markets 16.54.
The cheap price tags aren’t coming from weak results. UBA’s recent numbers are an example of the disconnect. The first quarter (Q1) 2025 profit before tax rose 30 percent to N204.3 billion, net income climbed 33 percent to N190 billion, and the stock has already delivered strong year-to-date gains. The stock has gained 105.5 percent over the past year, yet still trades below book value– a reminder that Nigerian bank shares were deeply depressed before currency reforms and higher interest rates revived the sector’s fortunes.
Nigeria’s top lenders posted solid results in early 2025, though the pace of profit growth has slowed as bumper foreign-exchange gains from last year fade. Rising interest income has become the main earnings driver.
Access Holdings Plc posted a pre-tax profit of N222.8 billion in Q1 of 2025, up 9.9 percent from a year earlier, as interest income surged 58 percent to N980.7 billion.
Zenith Bank Plc reported record quarterly interest income of N837.6 billion in the first three months of 2025, up 71 percent from a year earlier. The surge helped lift pre-tax profit 9.6 percent to N350.8 billion.
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Guaranty Trust Holding Company reported a pre-tax profit of N300.4 billion in Q1 of 2025, driven by robust growth in its core income lines. Interest income rose 41.1 percent year-on-year, while fee and commission income climbed 41.2 percent, underpinning the lender’s earnings momentum.
One reason Nigeria’s biggest banks remain undervalued despite their strong earnings is investor concern that the sector is entering a cooling phase as FX gains fade. Yet, first-quarter results have so far defied those expectations, showing resilient profitability.