Banking Stocks Gain N749.24bn over Rally in Access Holdings, UBA, 11 Others
As the stock market commenced 2024 on a positive note, listed banking stocks gained a total of N749.24billion in market capitalisation following investors renewed interest in Access Holdings Plc, United Bank for Africa Plc (UBA) and 11 others at the close of trades last week.
Also, the Nigeria Exchange Limited (NGX) All Share Index or ASI appreciated by 6.54 per cent Week-on-Week (WoW).
In the same vein, the NGX
Banking Index during the week under review emerged as the second-best performing Index, behind NGX Insurance Index.
The Banking Index appreciated by 10.29 per cent, while the NGX Insurance Index closed at 14.08 per cent at the close of business last Friday.
Capital market analysts attributed the surge in banking sector stocks to projected impressive 2023 corporate earnings, as most of these banks are expected to reward shareholders with dividend pay out.
Speaking, the Vice President,
Highcap Securities Limited, Mr. David Adnori stated that the banking stocks continued to rally as some of them are undervalued, stressing that investors are taking positions amid 2023 corporate earnings that come with full dividend payout.
“Of course, it is expected that Zenith Bank, Access Holdings, UBA, among others will declare a full dividend. With that reality, investors are taking position in these banking stocks and the impact is a reflection in the price appreciation early 2024,” he added.
He added that the proposed recapitalisation of the banking sector by the Central Bank of Nigeria (CBN) is contributing to the stock price appreciation.
At the 58th annual Bankers’ Dinner in 2023, CBN Governor, Mr. Olayemi Cardoso, had said a stress test performed on Nigerian banks revealed that while they would withstand mild to moderate stress, they would be unable to service a $1trillion economy projected by President Bola Tinubu in seven years, hence the need for recapitalisation.
Cardoso said, “Stress tests conducted on the banking industry also indicate its strength under mild-to-moderate scenarios of sustained economic and financial stress, although there is room for further strengthening and enhancing resilience to shocks. Therefore, there is still much work to be done in fortifying the industry for future challenges.”
He added, “Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is crucial to evaluate the adequacy of our banking industry to serve the envisioned larger economy.
“It is not just about its current stability. We need to ask ourselves, can Nigerian banks have sufficient capital relative to the finance system needed in servicing a $1trillion economy shortly, in my opinion, the answer is no, unless we take action. As a first test, the central bank will be directing banks to increase their capital.”