Sterling Bank Plc and Fidelity Bank Plc are leading the banking sub-sector of the Nigerian Stock Exchange (NSE) in terms of capital appreciation as at the close of trading last Friday indicating investors’ high demand for the equities.
An analysis of the banking stocks performance by THISDAY showed that Sterling Bank recorded the highest growth of 76 per cent, rising from N1.73 at the beginning of the year to N3.05 per share last Monday. Fidelity Bank Plc followed with a growth of 51 per cent, having appreciated from N2.29 to N3.45 per share.
United Bank for Africa Plc placed third with a growth of 37 per cent, while First City Monument Bank Plc garnered 33.3 per cent. Skye Bank Plc gained 31 per cent, just as Diamond Bank Plc and Access Bank Plc went up by 29 per cent and 18.7 per cent respectively. Unity Bank Plc appreciated by 13 per cent.
High expectations that banks would turn in impressive full year results have been driving the share prices at the stock.
Besides, it is expected that going forward, the banking sector would witness more businesses as financing opportunities begin to open up in the power and agricultural sectors due to Federal Government’s focus on those sectors.
Analysts at FSDH Securities Limited have predicted a robust outlook for the banking stocks in 2013 recommending them to investors to buy. According to them, certain factors will drive portfolio investment in banking stocks in early 2013.
“Our expectations that would drive portfolio investment in banking stocks in early 2013 are: The emerging financing opportunities in the economy, especially in power, transportation, agriculture, wholesale & retail trade, and oil & gas should drive bank earnings going forward. Good dividend payment and attractive valuation of banking stocks as they are trading at very low multiples,” they said.
They explained that the banking sector’s robust balance sheet, after the house cleaning exercises by AMCON, has strengthened the capacity of banks to increase their risk assets in the near-to-medium term.
According to them, their review of the Capital Adequacy Ratio (CAR) of the individual banks showed that they were above the regulatory minimum requirement of 10 per cent for national banks and 15 per cent for international banks. This, they said, meant that there was room to grow the risk assets of banks to support income generation.
The analysts added that increasing their risk assets would enable the banks to mitigate the drop in the yields on risk free assets. They said the announcement of the inclusion of FGN Bonds in the JP Morgan Bond Index and the favourable sovereign credit rating on Nigeria have generated a lot of interests in government securities, causing prices to rise and yields to drop.