Banking Stocks Remain Attractive, Lead Sectoral Gains with 69%

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Goddy Egene
The banking sector of the Nigerian Stock Exchange (NSE) continued to lead as the best performer two months to the end of the year as investors remain bullish on the banking stocks.

The performance of the banking stocks as shown by the Nigerian Stock Exchange (NSE) Banking Index is leading with a year-to-date growth of 69.34 percent. It has outperformed the NSE benchmark index, which has gained 35.68 per cent, by about 33.66 per cent.

Other sectoral indices are trailing the NSE Banking Index. For instance, the NSE Consumer Goods Index has appreciated by 28.7 per cent, while the NSE Industrial Goods Index and NSE Insurance Index rose by 27.6 per cent and 10.1 per cent respectively. The NSE Oil & Gas Index has recorded a decline of 9.7 per cent.

THISDAY checks showed that investors renewed demand for banking stocks on the expectations that banks would benefit as the economy has recovered from recession, a development that they believe would impact positively on the performance of the banks at the end of the current financial year.

Already some of the banks have recorded improved nine months results to September 30, 2017. Before the nine months results, some banks had recommended interim dividends.
Some market operators said while the economy faced serious headwinds that pushed it into recession in 2016, some banks still posted impressive results and declared significant dividends.

“It is therefore instructive for discerning investor to take position in the banking sector now that there are strong indications that the economy would recover. When this happens, it means better performance for banks and higher returns to shareholders at the end of the year,” a stockbroker had said.
The high demand for banking stocks, which lifted the sectoral index to a record high has also bolstered the share value of most of the stocks.

For instance, Stanbic IBTC Holding Plc has surged 193 per cent, while United Bank for Africa Plc has garnered 112 per cent. Fidelity Bank Plc has advanced by 92 per cent FBN Holdings Plc has appreciated by 83.6 per cent, just as Zenith Bank Plc has chalked up 76.2 per cent.
GTBank Plc and Ecobank Transnational Incorporated have chalked 70 per cent apiece. Access Bank Plc gained 67.2 per cent among others.

Analysts at Meristem Securities Limited, had expressed bullish sentiments towards the banking sector, saying that while the issues which plagued the sector in recent times were still prevalent to certain extents, the levels of income generation witnessed during the year, even in the face of significant credit loss charges, signal that the sector is driving towards another strong performance in 2017.

They said: “Also, we expect more risk asset creation from the sector in 2017, when compared with the previous year when the growth in the nominal value of assets was due to the depreciation of the currency. While the issues plaguing the banking sector are still prevalent and significant, the resilience of the sector, in general, is not in doubt, in our opinion. We expect that with a re-surgence in the economy and improvement of macroeconomic fundamentals, non-performing loan issues should dissipate and respite from this perspective should result in measured, appreciable risk asset creation, which should, in turn, drive growth further.”

The analysts added that given the state of the economy, which has seen the Monetary Policy Committee deploy policy tools to support the currency and manage price levels, interest rate environment has supported top and bottom-line growths for the majority of banks with liquidity to deploy.