Skye Bank, safest bank stock on NSE-Findings

Timothy Oguntayo, CEO, Skye Bank

The safest banking stock on the Nigerian Stock Exchange (NSE) for the week ended February 27^th is the Skye Bank Stock, findings have shown. This is despite the battered stateof most stocks following the recent negative portfolio outflow from the Exchange.

The metric for determining safety by Finance Analysts is the Beta, a measure that gauges a stocks volatility or risk level. The Financial Times displays the daily beta of all quoted firms and is the source of this finding.

“In finance, the beta (β) of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1,” says Wikipedia.

“It is the volatility, or risk, of a particular stock relative to the volatility of the entire stock market,” says wikihow.  “Beta is one of the fundamentals that stock analysts consider when choosing stocks for their portfolios, along with price-to-earnings ratio, shareholder's equity, debt-to-equity ratio, and other factors”.

The FT shows a beta of 0.84 for the Skye Bank stock on February 27^th, the lowest in the Banking Sector of the NSE indicating that it has the least volatility among banking stocks. Last Week was an improvement onthe previous week when the Bank coasted home as the second least volatile with equivalent beta figure of 0.837.

Following on the heels of Skye Bank is Eco Transnational International (ETI) with a score of 0.89 and StanbicIBTC with a score of 0.95.

Sterling Bank led the way with Banks with the highest beta with a beta of 1.89, followed by UBA with a beta of 1.76 and Diamond bank with beta of 1.7. Diamond Bank was the least volatile the week before with beta of 0.63.

FCMB had beta of 1.37; Wema Bank, 1.2; Union Bank, 1.19; GT Bank, 1.12 while Access Bank, First Bank and Zenith Bank had betas of 1.09, 1.04 and 1.02 respectively.

It would be recalled that Skye Bank recently acquired Mainstreet Bank in a little above N126 billion deal that analysts say would catapult the Bank into first tier competition once integration is complete. According to the Bank, the purchase would help cement its aspiration to play big in the retail and commercial segments of the banking business.