Despite waning sentiments in the Nigerian equities market compounded by the hike in interest rates, the shares of tier-1 banks listed on the Nigerian Exchange have appreciated by N48.762 billion in the last four days, checks by Nairametrics reveal.
Notable among the gaining banks are Zenith Bank Plc, Access Holdings Plc, FBNH Plc, UBA Plc and GTCO Plc. Stanbic IBTC Holdings Plc, which is not a tier-1 bank, also performed well during the period under review.
Rising interest rates are generally good news for bank stocks because it helps them to expand their net interest margins, this means that investors are gradually yielding to expert advice that taking positions in these stocks offers better investment opportunities, especially on the expectation of dividends and capital gains.
The Nigerian equity market yesterday halted days of a bearish trend to close the trading session on a positive note with the NGX-ASI gaining 14.06 basis points or 0.03% to 44,332.21 points.
A review of the banking index performance for the past five trading days showed the barometer that measures the performance of the banking sector grew by 5.62 basis points or 1.5% to close at 379.10 index points from the opening figure of 373.48 points on the 17th of October.
Checks by Nairametrics showed that GTCO Holdings Plc grew by 3.07% to N18.45 per share from N17.90 which was the opening share price on 17th October, while Stanbic IBTC Holdings Plc gained 2.84% to N29.00 per share from a share price of N28.20 at the commencement of the current year trading on October 27. FBN Holdings Plc rose by 2.1% to N9.70 per share from N9.20 per share it opened trading on Monday 17.
Access Holdings appreciated by 1.87% to N8.15 per share from N8.000 per share during the period under review. While UBA Plc increased by 1.45% to N7.00 per share from N6.90 per share, Zenith Bank Plc trailed by a gain of 0.9% from N20 per share to N20.20 at the close of trading yesterday.
The MPC recently voted to increase interest rates to 15.5% as the apex bank fights rising inflation.
The Central Bank during its last MPC meeting had increased the interest rate from 11.5% to 14% in the last two meetings, however with the inflation rate still spiking above 20%, the CBN has raised the rate further to 15.5% in a bid to combat the rising cost of goods and services.
According to market analysts, there is certainly an impact on equities as a result of higher interest rates, but investors should take a position on dividend-paying firms.
Investment analysts believe dividend-paying stocks are expected to do well given their strong fundamentals.
Performance of tier-1 banks’ share prices
- GTCO Holding Plc closed its last trading day at N18.45 per share and N543.005 billion in market capitalisation on the Nigerian Exchange (NGX) as against N17.90 per share and N526.818 billion in market capitalisation at the beginning of trading on October 17, hence has earned a gain of N16.187 billion or 3.07%.
- FBN Holdings Plc closed the trading day at N9.70 per share and N348.184 billion in market capitalisation compared to the opening figure of N9.50 per share and N341.005 billion in market capitalisation, hence has earned a gain of N7.179 billion or 1.87%.
- Access Holding Plc closed at N8.15 per share and N289.693 billion in market capitalisation on the NGX as against N8.00 per share and N284.361 billion in market capitalisation at the beginning of trading on October 17, hence has earned a gain of N5.331 billion or 1.87%.
- UBA Plc closed its last trading day at N7.00 per share and N239.395 billion in market capitalisation on the NGX as against N6.90 per share and N235.976 billion in market capitalisation at the beginning of trading during the period under review, hence has earned a gain of N3.419 billion or 1.45%.
- Zenith Bank Plc followed with a growth of 0.9% N6.279 billion to close at N20.20 per share and a market capitalisation of N634.209 billion from N20.00 per share and a market capitalisation of N627.929 billion it opened trading on October 17th.
What the analysts are saying
Mr Mike Eze, the Managing Director of Crane Securities Limited said the current low prices of stocks present investors opportunity to respond to expert advice that in the event of every downturn in the prices of shares what investors need to do is to reposition in the face of losses so as to gain in the near future.
- Eze, who stated this in a chat with Nairametrics, said the bank stocks were ripe for investment going by the current low prices of stocks and strong fundamentals in the rate hike environment.
- Eze noted that it was obvious that activities would stabilise in the market after the general elections, adding that this was the perfect opportunity for investors to stake their funds in the market. “This is the right time for investors to take part in the equities market, with the prices of shares at their lowest levels.
- The banking sector is always a viable area. Banks such as Zenith Bank Plc, UBA Plc, GTCO Plc, FBN Holdings, Access Bank Plc Fidelity Bank Plc and Stanbic IBTC are good investment destinations for this period.
- “When they were marked down for interim dividend, their prices started going down and that is to the advantage of investors. This is a good area to invest in now not only because they will pay their dividend but also for the capital gains on the share price. Investors should move towards those h-flying banks and also consumer goods stocks”.
Managing Director Cowry Asset Management Limited, Mr. Johnson Chukwu “dividend-paying companies offer better opportunities, especially the companies that are paying interim dividends. Financial stocks like GTCO, Zenith Bank, Access Holdings, Fidelity Bank, Stanbic IBTC, UBA, and consumer goods stocks like Guinness Nigeria, and Nigerian Breweries that paid interim dividends are good picks. The reason is that cash is king when the cash is coming regularly you can invest either in fixed-income securities or reinvest in equities”.
