Investors Swoop on Banking Stocks, Sterling Bank Rises 31%

Investors sustained demand for banking stocks at the equities market in the first week of the 2018, making the Nigerian Stock Exchange (NSE) Banking Index to gain 6.32 per cent.

Banking stocks had closed 2017 as investors most favourites with Banking Index rising 73.3 per cent on bargain hunting. And when the market opened for 2018, the high demand for banking stocks was sustained as the sector dominated the top price gainers in the week fetching investors significant capital gains.

Sterling Bank Plc led the price gainers with 30.5 per cent, followed by FCMB Group Plc with 28.4 per cent, while Diamond Bank Plc chalked up 26 per cent. Skye Bank Plc garnered 22 per cent.

Analysts have said investors are taking position to reap better returns on investment in the sector following anticipated improved financial results.

In 2017, for instance, 12 banking stocks appreciated, while only three lost value.

Fidelity Bank (+192.86 per cent) topped the gainers’ chart in the banking sector while recording the third highest return in the entire market. On its trail were Stnabic IBTC Holdings Plc (+176.67 per cent), FBN Holding Plc (+162.69 per cent), UBA (+128.89 per cent) and Access Bank Plc (78.02 per cent).

On the other hand, Jaiz Bank , Wema Bank Plc and Unity Bank Plc were the only counters with negative annual returns as their share price recorded respective declines of 49.60 per cent, 3.70 per cent and 3.64 per cent in that order.

Analysts at Meristem Securities Limited said: “Active investor participation was seen in the sector, as investors reacted to the inflow of favourable news within the space in a bid to position adequately for short-term and long-term profits. The sector’s performance was largely anchored by investors’ reaction towards the financial performance and corporate benefits of sector companies. We also note the impact of portfolio rebalancing activities and the year-end rally on the sector, as this drove most counters to their year-highs. In the coming year, we envisage increased participation within the space as we note that the sector is highly suited for speculative trading as well as long-term investments.”

Looking into 2018 at financial performance of companies in the sector, the analysts in 2018, they envisage a moderation in profit growth on the back of a decline in asset yield.

“Therefore, even though we expect a positive return at the end of the year, we do not envisage gains as sizeable as that recorded in 2017,” they said.