Nigerian Banking Sector – Twitter war is over, earnings rolling in gradually

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Brand Spur
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The US-China trade war seems to be gathering more momentum with President Donald Trump imposing sanctions on Chinese manufacturers. The U.S. imposed tariffs on $34 billion worth of Chinese goods as part of its new tariffs policy and this led China to respond with similar tariffs on U.S. products. Despite continuous deliberations, President Donald Trump appears hell-bent on maintaining his seemingly protectionist stance – elongating the trade war.

On the contrary, the Nigerian twitter “Bank War” ended in just a few days after Sterling Bank deleted its earlier tweet that showed the bank taking its customers to the moon via a rocket whilst some other banks were depicted with their logos and trademarks. Apart from some of the banks that might have been obviously referenced in the tweet through their logos, a few other banks’ Head Offices can be spotted in the background of the picture that accompanied the nicely crafted tweet.

Sterling Bank Plc “the One-Customer bank” is a full service national commercial bank in Nigeria with an asset base of c.N1.04 trillion and shareholders’ funds of c.N104 billion. The bank is estimated to have over 173 branches nationwide, 700 ATMs, 3000 POSs, 3000 professional employees and 1.5 million customers.

Access Bank Plc, cited with a snapshot that appears to depict its landmark “Access bank marathon” was quick to respond via its Twitter handle. The bank promised to bring the galaxy to its customers, portraying that an imaginary rocket can only be used by a bank with one customer.

Union Bank Plc, cited with a shot of its white stallion trademark logo gave some kind words of advice, preaching Simpler, Smarter, and Safer banking. They also advised that travelling to the moon without a spacesuit could be a risky adventure.

First Bank Limited was not left out as the bank had a good time with the social media buzz using the opportunity to showcase its strong heritage in the banking space and emphasizing its position as the “forefather” of the sector. A caricature of the bank’s trademark Elephant logo can be seen with a little boy riding.

Guaranty Trust Bank Plc was conspicuously missing from the social media action. The snapshot from the Sterling Bank tweet appears to have presented the bank’s logo as a cage. GUARANTY’s decision to stay visibly quiet might have been an intentional social media strategy as it may sometimes require more energy to do nothing. Anyways, some of the bank’s customers might have responded on its behalf…

After causing so much buzz on the internet for hours, Sterling Bank “the real MVP” came back to crown it all up with this…

A note of apology from the moon 

Sterling Bank, however, apologized to its fellow bankers and deleted the initial tweets stating that the message from its tweet must have been misconstrued.
One thing stands out from the apology anyway, the bank has already reached the moon…

Welcome to the world of Satire

Welcome to the world of digital marketing, where satire and caricature images of competing brands are constantly being used. This might be new to the financial services sector where money matters are taken with utmost seriousness. But no one should ignore the trend. A few popular automobile brands easily come to mind with their style of adverts. BMW and Mercedes Benz are commonly seen targeting each other in marketing skits.

Coca-Cola and their number one competitor, Pepsi have for long been at the center of a targeted advert war. Pepsi once portrayed a customer to have used
two cans of coke as a stepping stool just to reach a can of Pepsi. A few of the back and forth between the two global brands are below.

The depth of intelligence and creativity from the initial tweet from Sterling bank speaks to how much talent we have in the country – particularly from the youth. The internet is yet to fully unravel the entire mystery behind that picture. Who could have at first glance linked the Guaranty Trust Bank caricature logo to one of the songs (jailer) from Asa, the singer of their widely loved and accepted jingle, “The place to be”.

All I see around here are winners. The tweet definitely created the buzz Sterling Bank wanted. I understand some banks weren’t happy when they realized nothing from the initial tweet related to them as they would have loved to jump on the bandwagon. Little wonder FCMB tweeted “observing…”. The internet is spreading like wild fire. With banking penetration estimated at 63% and even much lower in the rural areas where the internet has reached, maybe it is time to ride on the wings of the internet and social media to spread the gospel of the banks.

Again, all I see are winners. Amidst the buzz over the previous weekend, a friend stated that no amount of social media stunt will make him open a new bank account – a school of thought I also share. However, an increasing number of Twitter followers showed interest in opening new accounts with different banks. One Twitter user had jokingly indicated how he intends to move Sterling Bank from a “One-Customer bank” to a “Two-Customer bank” by opening a new account. Whether he will or has walked into the bank or used any of their alternative channels to open an account is still unknown but one thing is clear, brand awareness has improved for the bank. It will be nice to know how many new followers they have gained in the last week. Another twitter user spoke about his interest in opening a Union bank account following a response from the bank which he considered “savage” and nice. Maybe now that the bank released its H1’18 result showing a 25% y/y rise in PAT, the Twitter user might have seen another reason to be a customer or even a shareholder. Although Guaranty Trust Bank remained silent all through the engagement, a few of their followers and sympathizers were quick to show why the bank is a market leader in the banking space – posting the scorecard
of the bank vs. its peers for FY’17.

A dose of more to come…

Yes, the Nigerian twitter bank-war might be over, but we are likely to see more of this in the future. There is an increasing need to reach out to customers and social media platforms provide a good opportunity to do so. I listened to a radio presenter on my way home last week and she recalled how her affinity for a pen she had used for weeks grew stronger when she noticed it was a Sterling Bank branded pen. Availability and recall ability biases in behavioral finance come to mind quickly. When a consumer has no rational basis for choosing among products, he sometimes goes with the one that he has seen or heard about. Little wonder, Guaranty Trust Bank got the attention of the young populace with its unique bank buildings and eye pleasing ambiance. The competition is getting fierce within the banking space and retail focus is gradually gaining traction. Although the quick apology from Sterling Bank might indicate that this competition is still with caution and the banking space might be more integrated and regulated than other sectors. One thing is however clear, the terrain is changing.

Back to the numbers…

Earnings season is here with a few of the early filers already reporting their half-year results. Performances have come in mixed, with some of the larger Industrial and Consumer Goods corporates posting earnings that are much in line with estimates, whilst a few others have missed most analysts’ estimates.

Most of the big banks are yet to release their result as they are more likely to pay interim dividends, hence, the need to audit their results. We have however seen largely positive numbers from FBNH and FCMB. Whilst FCMB’s performance was largely in line with our estimate following a strong 90% y/y rise in PAT, FBNH’s 14% y/y rise in PAT was much stronger than we had estimated – thanks to faster than expected moderation in loan loss amidst stronger growth in Non-Interest Income. DIAMONDBNK continues to report lower earnings with PAT down 86% y/y as at H1’18, pressured by high interest and non-interest expense.

It is definitely time for the other big banks to do their talking. GUARANTY and ZENITHBANK were quiet all through the twitter bank war and I expect their noise to come out loud now. Having reported record high profits consecutively in FY’16 and FY’17, the banks are looking to extend their performance this year. We estimate another strong performance for FY’18 and forecast PAT of ₦182.0 billion and ₦182.4 billion for GUARANTY and ZENITHBANK respectively. UBA and ACCESS are expected to come at a distant second for FY’18 in terms of earnings. We remain positive about their earnings and estimate PAT of ₦94 billion and ₦84 billion for the respective banks.

The market-leading subsidiaries of STANBIC should continue to support the Group’s performance. We estimate a strong 52% y/y rise in PAT to ₦70 billion for FY’18. In line with the historic pattern, we expect GUARANTY, ZENITHBANK, ACCESS, and UBA to pay an interim dividend after the release of their half-year results. The trend from STANBIC is less obvious.

In conclusion, despite our relatively positive earnings expectation from the banking space, we are less optimistic about the possibility of this being a catalyst for market revival as political uncertainties and interest rate normalization in developed markets continue to overshadow sound stock fundamentals. Having said that, we expect the earnings season to come with improved market activities as investors take quick short-term positions.

 

VETIVA RESEARCH