Shareholders in tier 1 banks recorded a combined gain of N1.296 trillion during the first nine months of 2023.
This performance was driven by a combination of factors, including the policies of the new administration of President Bola Tinubu, the harmonization of different exchange rates, and the floating of the naira.
Despite rising inflation, interest rate hikes, and jitters over the 2023 general elections, the Nigerian Stock Exchange (NGX) All-Share Index closed the third quarter of the year on a positive note, appreciating by 29.52% to close at 66,382.14 index points.
This development has pushed the market to its 15-year high on the back of strong positive sentiments.
Available statistics to the TheTimes showed that the All-Share Index, which is the broad index that measures the performance of Nigerian stocks, opened the trading quarter at 51,251.06 index points at the beginning of trading in January 2023 and closed at 66,382.14 points at the end of the third quarter on September 30, gaining 15.131.08 basis points or 29.52%.
Further analysis revealed that activities on the Nigerian Exchange Limited (NGX) which opened the trading year at N27.915 trillion in market capitalization at the beginning of trading, closed the quarter at N36,331 trillion, hence has earned a year-to-date gain of about N8.416 trillion.
Market analysts believed the renewed sentiment in the local bourse market had also grown following a craving to increase capital gains on the back of low prices of stocks owing to an upset in the financial market arising from unstable policies and build-up to the 2023 general elections.
The NGX had, during the period under review, emerged as one of the best-performing exchanges in Africa during a 3-month duration.
According to African Markets, a website tracking the performance of exchanges in Africa, the Ghana Stock Exchange (+22.84%) emerged first while NGX (+19.33%) emerged second on the list, followed by the Malawi Stock Exchange (+15.79%).
The banking index which measures the performance of the banks quoted on the floor of the Nigerian Exchange however appreciated by 59.57% to 666.22 0points from 417.50 points it opened for trading in January.
Historically, the banking sector has always been one of the sectors that benefit from an inflation and rate hike environment.
So, market experts believe that from a macro standpoint, things are set for the better in the sector.
In the meantime, TheTimes analysed how the share prices of five tier-one banks quoted on the floor of the Nigerian Exchange Group performed in the third quarter of 2023.
Notable among the banks are Zenith Bank Plc, Access Holdings Plc, FBNH Plc, UBA Plc, and GTCO Plc.
Data obtained from the NGX showed that the stocks of the five banks recorded a combined gain of N1.296 trillion during the quarter under review as all the tier-one banks recorded appreciation in market value following positive sentiment on the part of investors.
These stocks were selected based on their price performance from year to date and are represented by the percentage gained.
Zenith Bank Plc +31.04%
- The share of Zenith Bank Plc enjoyed a positive run during the quarter. The stock gained 31.04% in share price during the period, rising from N24.00 to N31.45 per share.
- The company enjoyed considerable buy-interests which drove up the market capitalization to gain N210.356 billion to stand at N987.419 billion at the close of trading on September 30, 2023, from the opening figure of N777.063 billion at the beginning of trading on January.
- Zenith Bank closed its last trading day Friday, October 6, 2023, at N32.00 per share on the Nigerian Stock Exchange (NGX), recording a 0.3% gain over its previous closing price of N31.90.
GTCO Holdings Plc +49.78%
- The shares of GTCO Holdings Plc witnessed an appreciable rally during the nine months. The banking stocks gained 49.78% of their share price during the period, from N23.00 to N34.45.
- The positive sentiment drove the market capitalization to earn N336.987 billion to hit N1.013 trillion at the close of trading on September 30, 2023, from the opening figure of N676.917 billion at the beginning of the quarter’s trading.
- GTCO closed the weekend at N36.05 per share on the Nigerian Stock Exchange (NGX), recording a 0.1% gain from its previous closing price of N36.00.
FBN Holdings Plc +50%
- FBN Holdings Plc’s stocks also showed positive sentiment during the period under review.
- The share gained 50% from N10.90 per share to N16.35 per share, increasing the market capitalization to N181.477 billion to close at N588,888 billion in market capitalization on September 30, 2023, from the opening figure of N407.411 billion.
- FBNH closed its last trading day (Friday, October 6, 2023) at N16.20 per share on the Nigerian Stock Exchange (NGX).
Access Holdings Plc +85.29%
- Access Holdings Plc also witnessed a positive appreciation in value during the nine months.
- The lender gained 85.29% in price during the period, from N8.50 to N15.75 per share. The bank witnessed buy pressure which drove up the market capitalization to earn N254.149 billion to close at N559.837 billion at the close of trading on September 30, 2022, from the opening figure of N305.688.94 billion at the beginning of trading.
- Access Holdings closed its last trading day at the weekend at N16.05 per share on the Nigerian Stock Exchange (NGX), recording a 0.6% drop from its previous closing price of N16.15.
United Bank for Africa (UBA) Plc + 121.05%
- The share of UBA Plc, a pan-African bank enjoyed a positive run during the quarter. The stock led the gainers by 121.05% in share price during the period under review, rising from N7.60 to N16.80 per share.
- The company enjoyed considerable buy-interests that drove up the market capitalization to gain N312.925 billion to stand at N574.550 billion at the close of trading on the last month of the third quarter 2023, from the opening figure of N261.625.57 billion at the beginning of trading on January.
- UBA closed its last trading day on Friday, October 6, 2023, at N17.20 per share on the Nigerian Stock Exchange (NGX), recording a 2.7% gain over its previous closing price of N16.75.
What the analysts want you to know
The managing Director, of Crane Securities Limited, Mr. Mike Eze in a chat with TheTimes said the banking sector’s profitability increases with interest rate hikes adding that institutions in the banking sector, such as retail banks, commercial banks, investment banks, and brokerages have massive cash holdings due to customer balances and business activities.
According to him increases in the interest rate directly increase the yield on this cash, and the proceeds go directly to earnings.
Eze said interest rates and bank profitability are connected, with banks benefiting from higher interest rates.
“When interest rates are higher, banks make more money, by taking advantage of the difference between the interest banks pay to customers and the interest the bank can earn by investing,” he said.
Analysts at Coronation Research have said that in 2023 they expect the Nigerian banking industry to face pressures stemming from stringent regulations, high inflation, continuous dollar shortages, and even asset quality issues.
- “Nonetheless, we expect modest growth in earnings from the banks featured, driven by rising interest rates, a strong contribution from non-interest revenue derived from FX revaluation gains, growth in nonbank businesses and digital banking,” they said.