NSE DG, Oscar Onyema

Festus Akanbi, Obinna Chima and Adaeze Anaekwe

The beleaguered Nigerian stock market has been upbeat since last month following the tight monetary policy regime in the economy as investors now shun other asset classes for equities.

In the meantime, analysts have argued that stock market investors could also be positioning in anticipation of a gradual recovery of the market following the recent announcement of market makers.

THISDAY had reported early last month (August) that the United Bank of Africa (UBA) Plc and Stanbic IBTC Plc had been appointed securities lending agents for equities and bond transactions at the Nigeria Stock Exchange (NSE).

The Central Bank of Nigeria had at its last Monetary Policy Meeting increased the cash reserve ratio to 12 per cent from eight per cent. This had resulted in severe illiquidity in the market.

Investigations by THISDAY revealed that most equities listed on the Nigerian bourse have been upbeat since August following the renewed appetite for stocks.

In fact, equity prices rose to their highest level in 14 months last Thursday.
Also, the NSE benchmark index stood at 23,704.34 last Thursday, the highest since July 20th last year.

Market capitalisation rose from N44.1 billion to N7.54 trillion on the back of the big gains by Nestle Nigeria Plc.

Nestle reached a fresh all-time high of N550 per share on Thursday, compared with the N500 per share it was as at closing bell of August 1.

In the same vein, while Guinness Nigeria jumped to N252 per share as at last Thursday from the N242 per share it was as at August 1, Nigeria Breweries also advanced to N123 per share from N119.11.
Banking stocks were not left out as they also benefitted from the positive trend in the market. For instance, while Access Bank’s share price climbed to N7.80 per share as at last Thursday from N7.14 per share as at closing bell of August 1, First Bank’s share price also appreciated to N13. 62 per share last Thursday from N11.63 per share on August 1.

In the same vein, just at GTBank’s share price increased to N17.95 per share from N17.41 per share on the first trading session last month, Zenith Bank also closed at N15.50 per share on Thursday from N14.96 per share on August 1.
Managing Director/Chief Executive Officer, Crane Securities Limited, Mr. Mike Ezeh, attributed the trend observed in the market to the return of foreign investors.

Ezeh who spoke in a telephone chat with THISDAY said: “Before now, prices had gotten ridiculously low and the marketing process which was announced seems to be bringing back confidence to the market.”

Meanwhile, market analysts have also attributed the rising fortunes of bank shares at the stock market to a regime of impressive performance as shown in the first half results of some of the banks already in the public domain.

Half year results of most of the banks made available to the Nigerian Stock Exchange showed that a lot of grounds have been covered in terms of revenue accumulation, a development which analysts attributed to the modest growth recorded in banks’ shares in recent times.

Although first quarter results of some of the banks are still being awaited as at the weekend, banks whose results are already in the public domain recorded appreciable improvements in comparison with their 2011 performance.

For instance, First Bank of Nigeria Plc, which posted a N20.1 billion profit after tax for its half year performance in 2011, recorded a 129 per cent increase with its record N46 billion in the first six months this year.

Zenith Bank Plc posted a total profit of N50.163 billion as against N67.441 billion recorded in the corresponding period last year.

UBA Plc recorded a profit after tax of N26.6 billion in first quarter 2012 whereas it declared N11 billion in the same period last year.
Diamond Bank recorded a profit before tax of N15.4 billion as against N3 billion recorded last year.

Sterling Bank Plc’s half year profit before tax is N32.7 billion while Unity Bank posted N2.997 billion in 2012 against N1.832 billion in the preceding year.

Skye Bank Plc profit after tax is N8.187 billion for 2012 while its previous year performance was N5.85 billion.

The improved performance was in tandem with the calculation of capital market watchers earlier in the year.  This is because in spite of the marginal rise recorded by the equities market between January and June this year; analysts predicted that the second half of the year would be more exciting for stock market investors on the back of improved banks’ earnings in the course of the year.

The positive development is sustainable. Speaking with THISDAY at the weekend Managing Director, Covering Asset Management Limited Mr. Johnson Chukwu said “I think that the positive trend in the prices of banks stocks will be sustained as it is driven by improving income profile of the banks. Almost all the banks that have published their half year financial report recorded increase in profitability with some banks reporting as high as 600% increase in profit.

Beyond the improvement in profitability, the banks’ financial health has also improved as a result of the sale of their toxic/non-performing assets to AMCON. Consequently, the improvement in profitability of the banks is likely to be sustained at least in the short to medium term hence investors’ appetite for their shares.

The attractiveness of banks’ shares is further boosted by their relatively low prices compared to other sectors such and Brewery and Food & Beverages Sectors where prices have gone to triple digits”.

A Lagos-based analyst said stockbrokers no longer analyse the performance of banks with their pre-crisis prices, but that they now have a benchmark for the banks.

“We are no longer using the prices they had before the market crashed to measure their performance, pointing out that the anticipation of good first half results from banks has recently propelled the equities market into a bullish rally and that so far the results released have been impressive”.