The best JSE Top 40 listed bank shares in August 2022
In this report we take a look at commercial retail banks, ABSA, Capitec, FirstRand, Nedbank and Standard in terms of total returns, peers valuations as well as broker ratings and price targets.
JSE Banking Index – Technical View
The chart above shows the long term trend for the JSE Banking Index to be in a firm uptrend. In the short term however, we are seeing a bit of a short term correction form overbought territory. A long bias to trades within the sector remains favoured provided that trend line support and the major low are not broken.
Total returns
| Security | Total Return: 1 Month | Total Return: 3 Month | Total Return: Year to Date |
|---|---|---|---|
ABSA Group |
13.46 |
10.45 |
24.41 |
Capitec Holdings |
4.02 |
-3.21 |
5.13 |
FirstRand |
6.35 |
0.95 |
13.90 |
Nedbank |
3.23 |
3.75 |
27.45 |
Standard Bank |
6.36 |
2.08 |
20.93 |
The above table highlights the total returns over a 1 month, 3 month and year to date look back period for major South African commercial / retail banks. The total returns figures include both capital gains and dividend returns.
Over a one and three month basis, ABSA has yielded the highest returns, although over the course of the year, Nedbank has provided the best total return followed by ABSA.
Capitec Holdings has underperformed its peers this year, being the only bank on our list to have yielded a single digit total return year to date.
Peer valuations
| RIC | Company Name | Trailing P/E LTM | Forward P/E FY1 | Dividend Yield Latest (%) |
|---|---|---|---|---|
SBKJ.J |
Standard Bank Group Ltd |
10.58 |
8.61 |
6.24 |
FSRJ.J |
FirstRand Ltd |
12.11 |
11.51 |
4.57 |
NEDJ.J |
Nedbank Group Ltd |
8.42 |
7.39 |
7.14 |
ABGJ.J |
Absa Group Ltd |
7.65 |
7.22 |
6.09 |
CPIJ.J |
Capitec Bank Holdings Ltd |
28.60 |
23.37 |
1.73 |
Peer Average |
13.47 |
11.62 |
5.15 |
|
In terms of a basic fundamental look, the ABSA Group trades at the largest discount to the peer average in terms of a trailing and forward looking Price to Earnings (P/E) multiples.
In terms of dividends paid, Nedbank has offered the highest historical yield.
Capitec, is currently the most expensive in terms of a historical and forward looking price multiples, while also offering the lowest yield in terms of dividend.
Broker ratings and long term price targets
| Security | Analyst Recommendation | No. of Analysts | Price Close | Price Target | Discount (-)/ Premium |
|---|---|---|---|---|---|
ABSA Group |
BUY |
9 |
184.82 |
214.75 |
-13.94 |
Capitec Holdings |
HOLD |
10 |
2105.00 |
2156.78 |
-2.40 |
FirstRand |
BUY |
10 |
67.85 |
73.33 |
-7.48 |
Nedbank |
BUY |
10 |
215.95 |
252.50 |
-14.48 |
Standard Bank |
BUY |
10 |
164.54 |
186.56 |
-11.80 |
Absa, FirstRand, Nedbank and Standard Bank all currently carry long term buy ratings, as per a consensus view from analysts surveyed by Refinitiv.
ABSA, Nedbank and Standard Bank all trade at double digit discounts relative to long term price targets.
Capitec currently trades at the narrowest discount to its long term price target and is the only one of the five banks covered not to carry a buy rating (current consensus view is ‘hold’)
How to trade banking stocks in South Africa
If you want to trade any of the JSE listed bank stocks we have discussed today, you can utilise IG’s CFD trading platform to speculate on the share price movements of the underlying asset – to buy (long) or sell (short) following these simple steps:
- Create an IG Trading Account or log in to your existing account
- Enter the company name or ticker in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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