The largest bank in Africa’s second largest copper hotspot, Lusaka Securities Exchange (LuSE) listed Zambia National Commercial Bank, is attracting demand from buyers as many take a positive view on future earning prospects. The ISIN0000000250 (ZNCO) stock is now the third largest in market capitalization K7.22 billion accounting for 12.2% of the local bourse excluding Shoprite Holdings. Zanaco rallies behind Illovo’s local subsidiary Zambia Sugar (K11.1 billion) and Copperbelt Energy Corporation (K12.4 billion). The three agribusiness, banking and energy stocks account for over half of the stock exchange studded with 23 listed corporates.
Given the banks’ earnings, customer deposits, credit growth and dividend payouts over the last few years, demand for the stock has exponentially scaled and is further supported by an aggressive digital agenda and a widening client base north of 5 million. Zanaco remains a proponent in the agency business that has been an enabler of banking services and transactability in the remotest part of the copper producer as part of a financial inclusion agenda. These agencies total 27,000 simultaneously creating employment that support livelihoods.
The big strong and reliable bank has dominated the red metal producers market with after tax earnings watermarks of above a yard three consecutive years, levels unattained in the Southern African market in which the market share has rallied an astounding 792%. FY23 prudential numbers released on 31 January, 2024 revealed a K1.89 billion after tax profit, close to 42% jump from previous years bottom line. The largest one day jump of 15% was observed on Tuesday 20 February.
“The stock valuation is reflecting dividend payout anticipation as the bank persistently defies earnings levels. Zanaco has over the last three years been market leader in most metrics ranging from profitability to revenues to deposit base,” ZATU Financial Consultants Managing Partner Munyumba Mutwale said. Zanaco shares are potentially 15% – 36% underpriced evidenced by a lower than market average 6.5 bond equities earning yield ratio of 4.1 suggestive of potential latitude for a stronger rally. Clarity on direction will firm up at the next Annual General Meeting where shareholders will be granted clarity on price earnings ratio, potential dividends, industry dominance and green finance leadership,” Mutwale said.
Homogenous to the banking sector key headwinds in the year including currency depreciation, tight monetary conditions and environmental risks in drought that could breed credit risks to impact the sector.
As at 3.55pm Zanaco stocks were trading for a record K5.00 a share.
The Kwacha Arbitrageur
