Key Highlights
- Tier 1 banks recorded a combined gain of N137.299 billion during the quarter that ended March 2023
- Activities on the Nigerian Exchange which opened the quarter at N27.915 trillion in market capitalization and 51,251.06 in the index at the beginning of the trading year on January 2023 closed on March 31, 2023, at N29.543 trillion and 54, 232.34 index points.
- Analysts expect the Nigerian banking industry to face pressures stemming from stringent regulations, high inflation, continuous dollar shortages, and even asset quality issues.
The nation’s local bourse closed the first quarter of the year on a positive note as the NGX All-Share Index and Market Capitalization appreciated by 5.8% to close the quarter at 54.232.34 and N29.543 trillion respectively despite the rising inflation, interest rate hike, and jittery over the 2023 general elections.
Market performance
Statistics obtained by the Nairametrics showed that activities on the Nigerian Exchange which opened the quarter at N27.915 trillion in market capitalization and 51,251.06 in the index at the beginning of the trading year on January 2023 closed on March 31, 2023, at N29.543 trillion and 54, 232.34 index points, hence has earned a quarter to date gain of about N1.628 trillion or 5.8%.
Banking index
The banking index which measures the performance of the banks quoted on the floor of the Nigerian Exchange however appreciated by 8.49% to 452.97 points from 417.50 points it opened for trading in January.
Historically, the banking sector has always been one of the sectors that benefit from an inflation and rate hike environment.
So, market experts believe that from a macro standpoint, things are set for the better in the sector.
In the meantime, Nairametrics analysed how the share prices of five tier-one banks quoted on the floor of the Nigerian Exchange Group performed in the month of November 2022.
Notable among the banks are Zenith Bank Plc, Access Holdings Plc, FBNH Plc, UBA Plc, and GTCO Plc.
Data obtained from the NGX showed that the stocks of the five banks recorded a combined gain of N137.299 billion during the quarter under review.
Note that aside from the shares of FBN Holdings whose share price dropped by 2.2%, all other tier-one banks recorded appreciation in market value following positive sentiment on the part of investors craving for full-year 2022 dividends.
These stocks were selected based on their price performance from quarter to date and are represented by the percentage gained.
FBN Holdings Plc –2.2%
- FBN Holdings Plc’s stocks witnessed a negative run during the period under review. The share dropped by 2,27% from N11.35 per share to N11.10 per share, decreasing the market capitalization to lose N8.974 billion or 2.2% to close at N398.437 billion in market capitalization on March 31, 2023, from the opening figure of N407.411 billion.
- FBNH closed its last trading on the weekend at N11.10 per share on the Nigerian Stock Exchange (NGX), recording a 0.4% drop from its previous closing price of N11.15.
Zenith Bank Plc +4.44%
- The share of Zenith Bank Plc enjoyed a positive run during the quarter. The stock gained 4.44% in share price during the period, rising from N24.75 to N25.85 per share. The company enjoyed considerable buy-interests which drove up the market capitalization to gain N34.536 billion to stand at N811.599.36 billion at the close of trading on March 31, 2023, from the opening figure of N777.063 billion at the beginning of trading on January.
- Zenith Bank closed its last trading day on Friday, March 31, 2023, at N25.85 per share on the Nigerian Stock Exchange (NGX), recording a 0.2% drop from its previous closing price of N25.90.
Access Holdings Plc +4.657%
- Access Holdings Plc also witnessed positive sentiment during the quarter. The lender gained 4.65% in price during the period, from N8.50 to N9.00 per share. The bank witnessed buy pressure which drove up the market capitalization to earn N14.219 billion to close at N319.907 billion at the close of trading on March 31, 2022, from the opening figure of N305.688.94 billion at the beginning of trading.
- Access Holdings closed the trading day at N9.00 per share and was also closed at the same price as its previous trading session.
United Bank for Africa (UBA) Plc + 9.15%
- The share of UBA Plc, a pan-African bank enjoyed a positive run during the quarter. The stock gained 9.15% in share price during the period under review, rising from N7.60 to N8.35 per share. The company enjoyed considerable buy-interests that drove up the market capitalization to gain N23.940 billion to stand at N285.565 billion at the close of trading on the last month of the first quarter 2023, from the opening figure of N261.625.57 billion at the beginning of trading on January.
- UBA closed its last trading day at N8.35 per share on the Nigerian Stock Exchange (NGX), recording a 4.4% gain over its previous closing price of N8.00.
GTCO Holdings Plc +10.86%
- The shares of GTCO Holdings Plc stock witnessed an appreciable rally during the quarter. The banking stocks gained 10.86% share price during the period, from N23.00 to N25.50. The positive sentiment drove the market capitalization to earn N73.578 billion to stand at N750.495 billion at the close of trading on March 31, 2023, from the opening figure of N676.917 billion at the beginning of the quarter’s trading.
- GTCO closed the weekend at N25.50 per share on the Nigerian Stock Exchange (NGX), recording a 0.2% drop from its previous closing price of N25.55.
What the analysts want you to know
Analysts at Coronation Research have said that in 2023 they expect the Nigerian banking industry to face pressures stemming from stringent regulations, high inflation, continuous dollar shortages, and even asset quality issues.
- “Nonetheless, we expect modest growth in earnings from the banks featured, driven by rising interest rates, a strong contribution from non-interest revenue derived from FX revaluation gains, growth in nonbank businesses and digital banking.
- We believe Nigerian banks currently trade at significant discounts to peers and thus offer an attractive entry point with a further case made by attractive dividend yields,” they said.
The managing Director, Crane Securities Limited, Mr. Mike Eze in a chat with Nairametrics said the banking sector’s profitability increases with interest rate hikes adding that institutions in the banking sector, such as retail banks, commercial banks, investment banks, and brokerages have massive cash holdings due to customer balances and business activities.
According to him increases in the interest rate directly increase the yield on this cash, and the proceeds go directly to earnings.
Eze said interest rates and bank profitability are connected, with banks benefiting from higher interest rates.
- “When interest rates are higher, banks make more money, by taking advantage of the difference between the interest banks pay to customers and the interest the bank can earn by investing,” he said.