Equity Analysis / Global

Banks: The key themes for the industry, and the stocks and markets most impacted

Our frontier and emerging market coverage of 91 banks in 20 markets enables us to draw parallels across the industry. We have identified 29 themes for the banking sector – 13 positive and 16 negative – and mapped our markets and stocks against them. 

From oil prices to IFRS introduction, domestic loan demand to weak capitalisation, we show the stocks and markets most exposed and/or most likely to benefit from these themes.

Full details for all markets and stocks are presented in the table on page 2.

At the country level, examples include:

External drivers

  • Monetary outlook: Loosening in Egypt, Ghana; tightening in Russia, Argentina
  • Fiscal outlook: Loosening in Sri Lanka, Ghana; tightening in Saudi Arabia
  • Crowding out of the private sector in Egypt, Ghana, Kenya, Nigeria
  • Regulations: Tightening in Vietnam, volatile in Bangladesh, Nigeria

Sector drivers

  • Asset quality: Improving in Egypt, Ghana, Mauritius, deteriorating in Pakistan
  • Liquidity conditions: Easing in Bangladesh; tightening in Saudi, Vietnam
  • Intra-sector performance divergence is wide in Bangladesh, Egypt, Kenya, Nigeria, Sri Lanka, Vietnam; stock-picking remains key
  • International expansion is taking place in Nigeria, Kenya, Mauritius, despite investors’ limited appetite for such strategies
  • Technology is having a growing influence, notably in Nigeria and Kenya, but banks in all markets are having to rapidly adapt
  • Capital ratios are strong in many markets, notably Ghana, Nigeria, Saudi; this should help protect dividend yields
  • Fee income: Increasingly in focus in Ghana, Nigeria, Vietnam

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Disclosures

This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...

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