I run a subscription service called Private Client Services (PCS) where business leaders email, call and ask questions. Let me share this correspondence with a client as many here have asked similar questions. I have edited out specific broad recommendations since no one here signed PCS terms (risk on you).
PCS Client Question: Ndubuisi, we want to invest in NSE [Nigerian Stock Exchange] banks. With what is happening in fintech, what do you think?
Ndubuisi Response: Chairman, the long-term outlook on Nigeria’s banking system is positive. However, I see a challenging half-decade on their valuations as investors price the impact of fintechs/ digital challenger banks. As global investors prefer the fintechs, over buying stocks of the banks, I expect a sustained underperformance which would accelerate in late 2023 when the digital tech firms circle more domains. Even insurers and HNI independent investors are betting via these fintechs rather than buying direct bank stocks. Any substitute vehicle is not good for the bank stocks.
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Yet, the banks, led by extremely brilliant minds will find ways to keep investors happy: I expect dividends to accelerate and that would be a way to cushion the effect of the evolving perception. So, if you want to buy bank stocks, buy dividend paying ones, with the assumption that even if the stocks do not move, dividends will take care of you. Here are the best using the aggregate of the last 5 years:[…]
The banks have great balance sheets and are evolving also just as fintechs. More so, the only way banks can play would be holdco which gives them structures to also do what fintechs are doing. So, we cannot count them out. Here is my calendar; let us speak and I will provide more insights when you are free.
Ndubuisi
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