Blue Chip earnings for Half of 2014

DIAMOND BANK PLC. | Expansion Plans Dragging Earnings Performance
Diamond bank Plc. ("DIAMONDBNK") released its Q2:2014 numbers in which the bank recorded a strong performance. The bank grew its top and bottom lines by 14% and 9% respectively with earnings performance dragged by the significant increase recorded in operating expenses of 22%. The bank's growth strategy includes a significant increase in branch network for 2014 which explains this growth. We remain positive on this ticker despite the expected sustained pressure on operating expenses for the rest of the year due to our belief in the bank's strategy and management operations.

FBNH | Proving a difficult year for Industry Giant 
First Bank of Nigeria Holdco. ("FBNH") released its Q2:2014 numbers recently in which the bank recorded 8% growth in top line but a 19% decline in bottom line. This appears disappointing and follows the recent trend in the bank's results. This result shows that the bank's earnings are being pressured by cost inefficiencies. That being said the bank has the balance sheet to swing this performance in subsequent future period provided they get a handle on their costs.

FCMB PLC. | Increased Efficiency Necessary to drive FY Growth
First City Monument Bank Plc. ("FCMB") released its Q2:2014 results recently in which the bank the bank recorded a much tempered result in H1:2014 when compared with its Q1:2014 results. The bank recorded a 10% growth in its gross earnings to NGN70bn, and a 3% growth in its bottom line to NGN10bn. Though it is expected that the level of loan growth for the rest of the year will be tempered, we believe that there is still a fair amount the bank can do operationally to boost margins by FY2014 and so we remain optimistic for this stock.

MOBIL OIL NIGERIA (MOBIL) | Sustained Top and Bottom Line Growth Leave More to Desire

Mobil Oil Nigeria Plc. (MOBIL) posted its 2013H1 numbers showed the company's sustenance of growth (a reversal of 2013 turnover decline). Turnover of NGN42.16bn recorded was 8.84% growth over the corresponding period in 2013. A reduced cost-to-sales ratio at 86.66% vs. 87.66% in 2013H1 coupled with income generated from asset sales during the first quarter necessitated a significant earnings growth. PAT of NGN4.81bn vs. NGN1.66bn in 2013H1 was also a commendable growth of 190%. An 8.19% increase in OPEX was the only drag even as finance cost was reduced by 62.34%. While the turnover growth was well in line with our expectation, we reviewed our full year earnings target owing to expected increase in direct cost management.

PORTLAND PAINTS & PRODUCTS PLC. (PORTPAINT)| Top and bottom line growth as company returns to profitability

Following a challenging 2012 and early 2013 in which PORTPAINT recorded full year and quarterly declines in turnover, the company appears to have weathered the storm as it released its second positive quarterly result for the year. The company's revenue stood at NGN1.440bn as at H1:2014, a 6.34% growth on last year's numbers. Though cost of sales and operating expense grew by 2.03% and  4.17% respectively, the company showed improvement on its cost efficiency, as  cost–to–sales moderated to 53.67% from 55.94% in H1:2013, even as OPEX margin pegged at 36.83%, down from 37.59% in the same period in 2013. Profit after tax (PAT) came in at NGN0.126bn (113.69% growth YoY), buoyed by a 105.5% growth in other income.

IBTC-CHARTERED BANK PLC. (STANBIC) | Persistently Consolidating on Accomplishments

IBTC Chartered Bank Plc. ("STANBIC") released impressive Q2:2014 numbers recently in which the bank recorded appreciable growth in both the top and bottom lines of 13% and 56% respectively. This aligns with its very impressive FY2013 results, and signals the potentials of the bank. The bank recorded laudable growth in both interest and non-interest incomes, which are largely responsible for the performance. Also, the equally impressive declines in interest expenses and loan impairment charges are positive signals of the direction the bank is going in, and is the most encouraging signal from any sector bank's regarding realignment strategies to the tough regulatory environment.

STERLING BANK PLC. | Increasing Operating Expenses Drags Profitability

Sterling Bank Plc. ("STERLNBNK") recently released its Q2:2014 result in which the bank recorded a 16.4% YoY growth in gross earnings. This result, though tempered in relation to performance in recent periods, is impressive in comparison to H1:2014 earnings releases by other banks. The bank costs increased during the period as they invested substantially in infrastructure, which acted to diminish its level of profitability as it witnessed a 6.7% decline in Profit after Tax during the period.

UACN PLC. | Shy Performance Expected by Full Year

United Africa Company of Nigeria Plc. (UACN), posted a 7.79% turnover growth (NGN40.26bn vs. NGN37.35bn in 2013:Q2) in its recently released 2014Q2 result. Management highlighted worsening security situation and intense competition as key factors pressuring performance. We believe this moderating performance (7.79% turnover growth vs. 16.33% 3-year simple average) may also be associated with adjustments to recent acquisitions by the company. Cost-to-sales inched up to 77.22% (vs. 74.75% in 2013:Q2) while Profit after tax (PAT) improved marginally by 3.19%.

UBA PLC. | Strategic refocus slows growth momentarily

United Bank for Africa Plc. ("UBA") released its Q2:2014 results recently in which the bank recorded gross earnings growth of 9% while earnings declined by 20%. In our opinion, the bank's performance was good, recording appreciable growth in both interest and non-interest income in the period, were it not for the marked growths in loan loss expenses and operating expenses. The bank's decision to refocus resources in the acquisition of private sector businesses is the likely reason for this modest performance. However, as the realignment completes, we expect to see stronger growth in loans to drive margins in subsequent periods.