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APRIL 9, 2007 VOL. 20. NO 26

A Dash to the Top

Cecilia Ibru, MD, OCeanic Bank

As investors make frantic efforts to buy into Oceanic International Bank Plc through its on-going public offer, financial analysts say the bank is on its way to the top
By Udo Onyeka
Perhaps, Oceanic International Bank Plc, is on its way to become one of the first five largest banks in Africa, going by the aggressive strategies being adopted by the management of the bank headed by Dr. (Mrs) Cecilia Ibru. Indeed, there is no gain-saying the fact that with the crop of highly intelligent men and women of integrity in the management team, the target of the bank to become a leading bank in the African continent would be achieved sooner than later.
Having grown from a small family bank into a mega financial institution within a decade, Oceanic Bank’s performances in all measuring indices are nothing but impressive.
Even before the on-going public offer of 3, 357,993,375 ordinary shares of 50 kobo each at N16.50 kobo per share, amounting to N55.4billion which opened on March 5, 2007, Oceanic Bank’s share has been one of the most traded stocks at the Nigeria Stock Exchange (NSE).
However, there are indications that the on-going offer would be over-subscribed. Since after the consolidation in the banking sector, investors' awareness towards banks have been positively aroused. So much so that now investors are more willing to invest in the industry, especially in banks with good track records such as Oceanic.
The Source gathered that investors have swooped on branches of the bank demanding to purchase the stock which has moved into its fourth week– a move which financial analysts say is as a result of the bank’s track record of high rate of returns.
The bank’s first quarter result ended December 31, 2006 was highly impressive as its gross earnings went up by 45.36 percent, to N12.53billion from 8.62billion it recorded in 2005. Profit-after-tax was also up by 46.15 percent, to N3.42 billion in the period under review, from N2.34billion in the corresponding period of 2005.
According to many financial analysts, one of which is Reverend Olu Odejinmi, managing director, Clearview Investment Limited, if this level of profit is sustained, it is reasonable to expect the bank to earn a profit of N16.5billion after tax for the year ending September 30,2007.
“With this level of profit, the product of its projected earnings per share of N1.03 and the recommended price earning of 20.75 percent will translate into a potential price of more than N21.37 per share,” he said, thus” confirming that the share is under-priced by 29.53 per cent, in relation to its offer price of N16.50.
“The offering price is a give away. Oceanic Bank has created many millionaires as a result of its high returns on investment. The bank represents integrity and resourcefulness. I strongly recommend the offer because it is very cheap and highly valuable. It is a good buy,” Odejinmi emphasised.
Talking about a good buy, Oceanic Bank stock is one. For instance, a review of the historical performance of the bank shows that it possesses every quality an investor needs from a good stock. It is believed to be aggressive as indicated by the fact that the bank has generated valuable returns.
The Source was told that in 2006, for instance, Oceanic Bank topped the return table, by returning 152.47 per cent among the top seven banks in the country. Capital gain accounted for 149.43 percent of the total return while the balance was by dividend yield. The stock price opened and closed year in 2006 at N6.17 kobo and N15.39 respectively.
From the capital gain point of view, it indicates that a holder of one million units of the bank's shares worth N6.17million at the beginning of 2006 and held on till the end of the year would have had N15.39million, thereby earning a capital gain of 9.22million.
Apart from capital increase which Oceanic Bank’s investors enjoy, The Source gathered that the bank is one of those that consistently pay dividends in the market. Recently, it paid 42 kobo and declared a bonus of one for four and this year the bank may double the dividend as it has proposed 83 kobo per share.
Investigations reveal that the bank has grown its gross earnings, net interest income and other operating income streams over the past five years at annual average of 56.94 percent, 49.65 per cent and 57.58 percent to clinch the first, second and second positions among the seven big banks.
The bank also led the big banks in terms of growth in total assets, loans and advances, and was second in deposit liabilities, and shareholders’ funds. Its profit-after-tax also grew at an annual average of 23.5 percent. Just as its gross earning went up by 386.81 percent, to N32.16billion in 2006 from N6.61billion in 2002. The bank’s profit-after-tax also rose by 337.22 percent, from N2.9billion in 2002 to N9.56billion in 2006; dividend per share (DPS) increased to 42kobo in 2006, up by 105 percent from 20.5kobo in 2002.
On net profit margin, the bank has also demonstrated a lead role. It was able to post an average annual profit of N24.63 kobo from every 100kobo in gross earnings. The evidence to improve on the existing performance has started with the first quarter result of N3.42billion. This should help in sustaining the leadership position of the bank in the foreseeable future.
The Source learnt that by the end of the on-going offer, the bank is expecting net proceeds of N53.2 billion to be utilised for information technology upgrade, branch network expansion (both local and offshore), working capital enhancement – reserves capacity building – in order to have adequate capital base to access and manage the Federal Government's foreign reverses. The new capital base which the bank is expected to attain at the end of the current offer will place it in the league of mega banks in the industry.
As one of the most capitalised banks in Nigeria, with N227.37billion capitalisation at its current market price of N19.53 per share and capitalisation of N309.35billion at the current market price, after the completion of the current public offer with supplementary allotment, Oceanic is really aiming for the top with the crop of dedicated management and staff team available to it.
According the Managing Director of the bank, Dr. (Mrs) Ibru what brought the bank to the capital market was to get funds for expansion, “We came to the capital market because we need to expand. In banking, you use shareholders funds for expansion, not that of customers. The bank needs more capital so that it can create more values and wealth for investors," she said.
While recommending the offer for all wise investors, Ibru said the bank’s selling points are its pedigree, track record of performance, wealth creation potentials, future plans, various products and customers’ friendly activities among others. She said with all these, the bank is bound to be on top as investors are impressed with it's performances and services.