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Zenith Bank Rises to 4-Month High on Valuation: Lagos Mover

Zenith Bank Plc, Nigeria’s third-largest lender, rose to the highest level in four months as its valuation made it more attractive to investors, according to Renaissance Capital.

The lender gained 2 percent to 22.06 naira in Lagos, the commercial capital, the highest since June 12. About 110 million shares traded, or 5.7 times the three-month daily average.

The stock is trading at a price-to-book value of 1.5 times, according to data compiled by Bloomberg. That is “cheap compared to its peers in the Nigerian banking industry and emerging market banks,” Adesoji Solanke, a Lagos-based banking analyst at Renaissance Capital, said by phone. “We rate the stock a buy, at a target of 25.30 naira.”

Nigeria’s largest lender, Guaranty Trust Bank Plc, has a price-to-book value of 2.7 times. Zenith looks attractive even as Renaissance Capital reduced its full-year 2013 estimated profit by 7 percent to 91 billion naira ($569 million), Solanke said.

Zenith Bank said on Aug. 15 first-half net income was little changed at 45.4 billion naira, compared with 42.4 billion naira a year earlier, as the central bank ordered a reduction in fees changed by lenders. Revenue rose 13 percent to 171 billion naira.

The Central Bank of Nigeria told banks in sub-Saharan Africa’s second-biggest economy to lower fees and commissions starting April 1 to minimize conflict with clients. The cash reserve requirement for federal, state and local government deposits was raised to 50 percent from 12 percent, the regulator said July 23.

Bigger banks like Zenith are more likely to withstand tight market conditions owing to the size of the balance sheet, Renaissance Capital said yesterday.

Zenith Bank’s shares have risen 13 percent this year compared with a 20 percent increase for the Nigerian SE Banking Index, which tracks the 10 largest banks in Africa’s biggest oil producer.

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