Kayode Tokede
After several months of massive gains, the market value of Zenith Bank Plc, Guaranty Trust Holding Company (GTCO) Plc, and five others depreciated by N406.27billion in January 2024, following profit-taking activities by investors,
The other banks are: Access Holdings Plc, United Bank for Africa Plc, Stanbic IBTC Holdings Plc, and Fidelity bank Plc.
Consequently, the Nigerian Exchange Limited Banking Index (NGX Banking) emerged as the worst performing index in January, dropping by 3.4 per cent Month-Till-Date (MtD) to 866.93 basis points the stock market closed in January 2024 from 897.20 basis points it opened this year.
Analysis of trading numbers showed that the stock price of Zenith bank recorded the highest decline in January 2024. The stock price of Zenith bank dropped by 9.18 per cent or N3.55 per share to close at N35.10 per share as of January 31, 2024 from N38.65 per share it closed for trading in 2023.
Following Zenith Bank was GTCO that record second highest decline in market value in January 2024, dropping by N103.01 billion. GTCO’s stock price dropped by 8.6 per cent or N3.50 per share to N37.00 per share from N40.50 per share it opened for trading this year.
As FBN Holdings dropped by 7.86 per cent or N1.85 per share to N21.70 per share as of January 31, 2024, its market value was down by N66.41billion in January 2024, to join the top three losers in NGX Banking stocks on the Exchange.
Further finding revealed that: Stanbic IBTC market value was down by N60.25billion; United Bank for Africa Plc (UBA) depreciated by N42.75billion, Access Holdings, N15.99billiion and Fidelity Bank declined by N6.4billion in market value as of January 2024.
On the flip side, Ecobank Transnational Incorporated (ETI) added N104.59billion in market value when its stock price appreciated by 27.27 per cent or N5.70 per share to close at N26.6 per share as of January 31, 2024 from N20.90 per share
Reacting to NGX Banking index worst performance in January, the Vice president, Highcap Securities Limited, Mr. David Adnori stated that investors profit-taking activities impacted negatively on listed banking stocks on the bourse.
“The banking stocks had propelled trading volumes that has trigged thee market. The listed banking stocks are always the most traded sector on NGX. GTCO, Zenith Bank, among others are larger movers in the market.
“A lot of investors bought these stocks early 2023 at lower prices. GTCO early 2023 was trading below N20.00 per share and Zenith Bank between N21-N22 per share.
“When the stock price of these banks gradually appreciated, investors’ are of decision to take profit-taking while some opted to stay because of their 2023 earnings.
“The CBN’s warning to banks to not utilise the foreign exchange (FX) revaluation gains realised from the 60 per cent devaluation of the naira to pay dividends or for other operational expenses and capital bank hike weaken investors holdings in banking stocks.
“Nigerian banks command best fundamental of companies in the stock market and the action of investors not connected to the fundamentals of listed banks. The decline in market value last month is connected to profit-taking by investors.”
At the 58th annual Bankers’ Dinner in 2023, CBN Governor, Mr. Olayemi Cardoso, had said a stress test performed on Nigerian banks revealed that while they would withstand mild to moderate stress, they would be unable to service a $1trillion economy projected by President Bola Tinubu in seven years, hence the need for recapitalisation.
Cardoso said, “Stress tests conducted on the banking industry also indicate its strength under mild-to-moderate scenarios of sustained economic and financial stress, although there is room for further strengthening and enhancing resilience to shocks. Therefore, there is still much work to be done in fortifying the industry for future challenges.”
He added, “Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy. It is crucial to evaluate the adequacy of our banking industry to serve the envisioned larger economy.
“It is not just about its current stability. We need to ask ourselves, can Nigerian banks have sufficient capital relative to the finance system needed in servicing a $1trillion economy shortly, in my opinion, the answer is no, unless we take action. As a first test, the central bank will be directing banks to increase their capital.”
Findings show investors have begun positioning themselves in the bank stocks listed on the NGX following the announcement of the proposed recapitalisation of the banks in 2024.
There are reports some big banks may be eyeing smaller and weaker ones in the event the proposed consolidation in the sector fuels possible acquisitions.
Take for instance, the stock price of Wema Bank Plc appreciated by 78.57 per cent or N4.40 per share to close January 2024 at N10.00 per share from N5.60 per share, while FCMB Group gained 20.95 per cent or N1.55 per share to close at N8.95 per share as of January 31, 2024.
In addition, Unity Bank rose by 43.8 per cent or N0.71 per share to N2.33 per share.
In 2023, the NGX Banking Index recorded a growth of 114.9per cent, making the index the second-best performing index on the NGX after the oil and gas index.
Throughout the year, banks emerged as some of the highest profit-generating corporations in Nigeria. This impressive growth was fuelled by a significant increase in interest income and gains realized from the devaluation of the Naira in second quarter of (Q2) of 2023.
UBA outshone its peers on the NGX in 2023, witnessing a remarkable 237.5per cent share price appreciation, closing the year at N25.65 with a market cap of N877.2 billion.
The bank’s robust fundamentals were evident, with a profit after tax of N449.3 billion in the nine months to September 2023, marking an impressive year-on-year growth of 287.2per cent from the corresponding period in 2022.
Notably, UBA recorded a comprehensive income of N886.8 billion during the first nine months of 2023, propelled by a substantial foreign exchange revaluation gain of N276.1 billion.