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Banking Stocks Tumble Amid Naira Swap Polemics, Investors Profit-taking
Prices of listed banking stocks on the trading floor of the Nigerian Exchange Limited (NGX) tumbled last week on the back of profit-taking and naira swap controversies that have continued to rock Nigeria’s banking sector.
Consequently, the NGX Banking Index emerged worst performing index on the NGX as highly capitalised listed banking stocks such as Zenith Bank Plc, Guaranty Trust Holdings Plc (GTCO), among others depreciated.
As the stock market dropped by 0.96 per cent Week-on-Week (WoW) to close at 53,804.46basis points, NGX Banking index depreciated by -1.34 per cent WoW or 6.05 basis points to close at 446.97 basis points.
The banking sector in February 2023 has so far performed poorly due primarily to the currency swap policy of Central Bank of Nigeria (CBN), which President Muhmmadu Buhari insisted has short- and long-term benefits for the country.
Out of 14 listed banking stocks on the NGX, a total of nine depreciated, four traded flat, and three appreciated.
Fidelity Bank Plc depreciated the most, followed by FCMB Group Plc and Wema bank Plc.
The stock price of Fidelity Bank dropped by 0.82 per cent to close last week at N4.76 from N5.58 it opened for trading, while FCMB Group declined by 0.32 per cent from N4.60 per share to N4.28 per share.
Wema Bank saw its stock price closing last week at N4.00 per share, a decline of 0.13 per cent from N4.13 per share as Zenith Bank dropped by 0.2 per cent to close at N25.00 per share from N25.2 per share.
THISDAY findings revealed that for the first time since 2022, the stock prices of GTCO outperformed Zenith Bank last week.
Both Zenith Bank and GTCO had opened for trading last week at N25.20 per share but investors’ profit taking down Zenith Bank to N25.00 per share, while GTCO closed for trading at N25.15 per share.
Nigeria’s largest bank by profits and net assets, Zenith Bank still outpaced GTCO as the most valuable bank in the country.
Zenith Bank’s market capitalization rose to N784.9 billion last Friday, while GTCO hits N740.19billion.
Nigeria’s most efficient bank, GTCO, the owner of GTBank has gained N63.2billion in market valuation as Zenith Bank added N31.4billion so far in 2023.
GTCO’s shares price opened trading in 2023 at N23.00 per share and closed last Friday at N25.10, while Zenith Bank closed trading last Friday at N25.00 per share from N24.00 per share it opened for trading this year.
Analysts attributed the decline in banking stocks to the scarcity of Naira, stressing that its impact likely slow banking performance and the economy in the first quarter (Q1) of 2023.
“The decline in banking stocks was actually anticipated as investors would like to take immediate profit ahead of the resolution of the problem around cash scarcity which is likely to slow down the economy in Q1 2023 and beyond. It is normal for the market to behave that way, even though it is temporary, ”said the Chief Executive Officer, Wyoming Capital and Partners, Mr. Tajudeen Olayinka.
On his part, the Managing Director/Chief Business Officer, Optimus by Afrinvest, Mr. Ayodeji Ebo blamed the decline in Banking index on profit taking and uncertainties in the sector, the Nigerian economy because of the 2023 general election.
The Chief Operating Officer, Supra Commercial Trust Limited, Mr. Charles Fakrogha stated that both Tier-1 banks have shown leadership in profits and dividend payout to shareholders
He said, “Some analysts argued that GTCO is better than Zenith bank in terms of return on investment and others will argue that Zenith bank is better. I think the price of GTCO surpassing Zenith bank is going to be temporal. By the time both banks released 2022 full year results and the Naira scarcity is over, investors will then see their true prices. For me, I still believe that Zenith bank will be at the top in terms of price.”
Commenting on the Banking sector’s general performance so far in 2023, the Managing Director, Afrinvest Research & Consulting, Mr. Abiodun Keripe said the NGX banking index is up by 7.06 in its year-to-date (YtD) supported by positive performances across the sector excluding Unity Bank Plc that has dropped by 7.3per cent YtD.
He disclosed that the banking sector’s strong YtD performance was led by ETI (+16.5 per cent), FCMB Group (+11.2per cent), and United Bank for Africa Plc (+9.9 per cent).
In his words, “The recoil in the outgone week in my view is connected in part to early profit-taking ahead of the election week and on the other hand, the negative feedback loop from the socio, economic and political landscape. The poor implementation of the Naira redesign and cashless policies are expected to dampen investor appetite and the performance of banks in 2023.
“In the past weeks, some of the banks have witnessed increased attacks and disruption to normal operations which have resulted in the closure of some bank branches and skeletal operations where possible. This is expected to have a negative impact on Q1 earnings, though income from digital channels could help reduce the impact. As normalcy returns to the socio, economic, and political environment post-elections, we hope to see a recovery in the sector.”