In the latest market research by Thaddeus Investment Advisors & Research Ltd, eight banks with the best price performance for the first eight trading days of 2011 are those rescued in 2009 by the Central Bank of Nigeria (CBN).

The banks are; Afribank, Intercontinental Bank, Spring Bank, Fin Bank, Oceanic Bank, Bank PHB, Union and Unity Bank.

* Stanbic IBTC Bank has the best price performance (19.6%) among the twelve listed banks that did not receive any form of sanction or reprimand from the Central Bank in 2009 as of January 13th, 2011. It is interesting to point out that Stanbic IBTC Bank is the only listed bank to decline participation in the purchase of its non-performing loans by the Asset Management Company of Nigeria (AMCON). The opting out of participating in the AMCON deal appears to have sent the right signal to investors. The interest in Nigerian banks at this time is largely from expectations of a quick and drastic turnaround in the banks' financial performance preempting a bull run and not fundamental undervaluation across the board. The market is clearly giving an edge to the only listed bank that declined to be part of the AMCON deal in comparison to other listed non-sanctioned or reprimanded banks.

* The eight banks with the best price performance for the first eight trading days of 2011 are all banks that were sanctioned or reprimanded in 2009 by the Central Bank. (Afribank, Intercontinental Bank, Spring Bank, Fin Bank, Oceanic Bank, Bank PHB, Union and Unity Bank.) This shows that a good chunk of investors see the most upside in the banks that have had the most setback in their businesses and have had the most negative price performances relative to 2008 levels and expect AMCON's intervention to provide its greatest and immediate impact to the financial performance of these sanctioned or reprimanded banks.

* Zenith Bank is the bank with the highest level of institutional investor interest and despite this is ranked 19th out of 22 listed banks (ETI inclusive) in terms of price performance as of July 13th, 2011. The number of shares per trade for Zenith Bank on January 12th is 37X more than the number of shares traded on December 31st, 2010. (This is the day the agreements were signed with AMCON by participating banks.) Interestingly, the institutional investor interest is not showing up in the price performance charts. Clearly the herd mentality is driving majority of Nigerian banks' stock prices as the "sheep" continue to make their presence felt by investing with a lot of "little" money. Usually, retail investors invest in stocks that institutional investors have purchased. Not the case in the Nigerian stock market so far as majority of investors have put intrinsic values on the back burner.

* FCMB has the worst price performance among listed banks (ETI inclusive) for the first eight trading days of 2011 at 6.7%.

* Wema Bank is the only bank among the nine listed sanctioned or reprimanded banks that does not have a top nine price performance among listed banks.

* The bank with the best price performance so far in 2011 is Afribank at 42.2% as of January 13th, 2011. This is also the only sanctioned or reprimanded listed bank that has clearly stated its intended buyer and reserve buyer so far. Afribank's stock price has risen approximately 5X faster than the overall market as of January 13th, 2011. It's volume traded as of January 13th, 2011 is 1,300% more than the volume traded on December 31st, 2010. The number of trades has increased 288% over the same two dates. The number of shares traded per deal has increased by 262% over the two dates in question and increased 161% from January 12th to January 13th. We see increased institutional investor interest in Afribank plausibly not unrelated to its preferred bidder quietly increasing its stake through the secondary market.

* Sterling Bank at N2.69 has the cheapest stock price (in absolute terms and not fundamental) among all listed banks that were not sanctioned or reprimanded. To put things in proper perspective, four sanctioned banks (Oceanic, Afribank, Intercontinental and Union Bank) have higher stock prices than Sterling Bank as of January 13th, 2011. The retail market appears to have realized this as the stock has the second best price performance among the non-sanctioned or reprimanded banks behind Stanbic IBTC at 16.45% as of January 13th, 2011. This further shows the strength of the "AMCON effect" on investors' trading patterns thus far. Sterling Bank had the best price performance among Nigerian banks in 2010.

* Banks that have the most retail investor interest have the best chance of topping the price performance charts in 2011 in our opinion. The number of shares per deal traded by Stanbic IBTC Bank and Access Bank (the banks with the best price performances for 2011 among non-sanctioned banks as of January 12th) on December 31st, 2010 and the number of shares traded per deal on January 12th declined by 56.6% and 56.5% respectively. What we see here is retail investors will be key to the price performance of Nigerian banks in 2011.

* Six Nigerian banks are trading at double-digit prices. Three were there in 2010 (First Bank, GT Bank and Zenith) and three more have joined (Stanbic IBTC, UBA and Access Bank) so far in 2011. Skye Bank is knocking on the door.

* All 22 listed banks on the Nigerian Stock Exchange have achieved a positive price performance for 2011 so far. No surprise that the ASI Index is up approximately 9% for the year.

Overall, we see a trend towards retail investors driving the performance of the Nigerian Stock Market in 2011. Given the impatient, non-savvy, emotion driven nature of the average retail investor, we expect the ASI index to experience a frequent cycle of peaks and troughs in 2011. The 9% run thus far of the ASI index is largely due to emotion and not reality. A case of overestimating solutions. The risk here is if the immediate impact of the AMCON intervention on participating banks does not meet the overly high expectations of the retail investing public in hindsight, reality will set in and the majority of retail investors will jump off the bandwagon as quickly as they got on.

We see a similar situation to last year in which the market used all its energy in the first half of the year and ran out of steam thereafter. Nonetheless, we expect the market to return 26% for the year (margin of error of +-3%). We also expect the 5% cap on price movements in either direction to be either permanently removed or increased to at least10% at the barest minimum before the end of this year. There is still a lot of room to realize profit on logical and illogical bets. Profit does not discriminate either way as long as you are able to sell a stock at a higher price than you paid for it regardless of the reason you took position in the stock.

Ever wondered why an agreement was signed by participating banks with AMCON just in the nick of time before the year 2010 was over? The answer is not far-fetched. The inter-relationship between AMCON, Nigerian banks and the Nigerian Stock Market is far from superficial. Not surprising to us that the three non-Nigerian owned banks stayed away from the AMCON deal.

By Jude Fejokwu, Principal Analyst, Thaddeus Investment Advisors & Research Ltd (thaddeusresearch@gmail.com).