The NGX Banking Index has seen a remarkable resurgence, soaring by over 20% after hitting a low of 774.35 in April, with particularly strong gains recorded during August and September.
On March 28, 2024, the Central Bank of Nigeria (CBN) issued a circular introducing a new recapitalization policy for commercial, merchant, and non-interest banks, set to take effect on April 1, 2026.
This announcement prompted a considerable sell-off in banking stocks, particularly among the FUGAZ group, leading to a dramatic 24% decline in the index throughout April.
In the wake of this downturn, the index has started to rebound, with large-cap banking stocks within the FUGAZ group experiencing a notable correction, particularly during the months of August and September.
Key Insights:
- Following the Central Bank of Nigeria’s announcement on March 28, bank share prices, particularly within the FUGAZ group, saw significant declines.
- Major players including FBNH, UBA, GTCO, AccessCorp, and Zenith faced sharp drops of 32%, 14%, 37%, 32%, and 28%, respectively.
- The drop in these banking stocks contributed to the sector’s overall decline, with the index losing 774 points in April.
- According to analysts, the recapitalization policy created uncertainty, leading many investors to adopt a wait-and-see approach, further dampening stock prices.
However, the index has since staged a recovery, gaining over 20% from its April lows, particularly buoyed by positive market activity in August and September.
FUGAZ Stock Performance
First Bank Holdings Nigeria
First Bank Holdings saw its share price plummet by 32% in April, from N35 to N23, amid a 50% reduction in market volume.
Since then, the stock has recovered by 28%, closing at N27 in September, supported by strong market activity with 600 million shares traded.
United Bank for Africa (UBA)
UBA’s stock dropped 14%, falling from N28 to N23 after the March announcement, and hit a low of N20.30 in July.
However, by September, the stock rebounded by 22%, with market volume reaching 585 million shares.
GTCO
GTCO experienced a sharp 37% decline, dropping from N52 to N32 per share as bearish sentiment prevailed in April 2024.
Since then, the stock has bounced back, appreciating by over 40%.
Access Holdings
Access Holdings fell by 32% in April, sinking from N24 to N16.
However, by September, the stock had corrected by 21%, closing at N20.60 as the sector began to recover.
Zenith Bank
Zenith Bank’s share price fell by 28% in April, in line with the broader sector decline. Since then, the stock has since gained over 17%, with a notable 15% rise in September alone.
For market analysts like Mercy Okon, an Investment Analyst at Parthian Associates, the recent rebound in banking stocks can be attributed to the positive financial results released in August and September.
“These reports have significantly bolstered investor confidence and uplifted market sentiment throughout the sector.”
Nonetheless, the positive sentiment within the sector is anticipated to extend into October, fueled by favorable corporate disclosures.