The S&P 500, DJI, NASDAQ, Digital currencies, commodities, and even the Nigerian equities markets have all experienced a great run in 2024.
A couple of assets traded at their highest prices ever.
Bitcoin, NASDAQ, and all hit their all-time highs this year.
The reason for this rather unrelated and relatively long-winded prologue is the fact that sometimes, markets move in tandem with each other and not necessarily because of intrinsic momentum or impetus.
It is very vital to distinguish a sector that is simply latching on to the over trend from another that is on a trend of its own.
In 2024, bank stocks performed very well in the Nigerian market – but so did BUA, Transcorp Hilton, Gold, Bitcoin, and NASDAQ. As investors, the major concern is about what will happen and not what has happened. Only a researcher or academic would be overly concerned with the past hence the popular investing disclaimer is “past performances do not guarantee future results”.
On the heels of profits exceeding expectations, tidings or expansions in Europe and neighboring African countries, and increased adoption, Nigerian banking stocks have performed pretty well. Most posting double-digit yearly performances.
All of the stocks of the tier 1 Nigerian banks have been in the green so far this year. Fidelity Bank stock is up almost triple figures with a 91.67% yearly return. United Bank for Africa, UBA stock is up 50.92% as compared to this same time last year. Zenith Bank(14.11%), GTCO(36.06%). All of the
The banking sector vs other sectors in the Nigerian equities market in 2024 so far
In comparison with other sectors, the banking sector has remained one of the best-performing sectors this year and indeed over the past half a decade, Showing the strength, resilience, and adaptability of the sector.
YTD performances of equities in the manufacturing and hospitality sectors have outperformed banking stocks this year. For example, Transcorp Hilton stocks have posted a 408.08% YTD so far. BUA Foods is up 104.19% since the beginning of the year. Dangote Cement was up almost 100% between January to February but the stock soon slowed up. Dang Cem is up 49.67% YTD.
However, the banking sector outperformed the Telecommunications sector in the equities market this year. Traditional investor favorites like MTN, Airtel Africa, and Globacom all underperformed this year. The sector which is undergoing seismic shifts in user preferences and operation costs was among the worst hit this year. MTN Nigeria stock is down 35.15% this year. Airtel Africa is also in the red for the year; down 18.59% YTD.
Comparing the sector with the benchmark index the NGX All Share Index ASI, it has performed well. The NGX ASI is up 31.34% YTD being outperformed almost 200% by Fidelity Bank equity. In general, the banking sector has considerably outperformed the wider Nigerian equities market this year.
Tier 1 bank profits for 2024
Ironically, the top-tier banks smiled at the bank this year as most hit and exceeded quarterly profit targets.
Zenith Bank
Zenith Bank Plc announced its audited results for the half-year ended 30 June 2024, recording an impressive triple-digit growth of 117% in gross earnings from N967.3 billion reported in H1 2023 to N2.1 trillion in H1 2024.
Access Bank
Access Bank reported a pre-tax profit of N146.1 billion in the second quarter of 2024. The bank also reported Interest Income of N752.5 billion for the quarter, up 113% on a Quarter-on-quarter QoQ basis. Their net Interest Income was reported at N237.6 billion a 84.3% QoQ from corresponding quarter in 2023.
United Bank for Africa
United Bank for Africa (UBA) Plc unaudited results for the third quarter ended September 30, 2024, recorded strong and impressive growth across all its key indicators.
As in the first two quarters of the current fiscal year, the bank’s gross earnings grew significantly by 83.2% to N2.398t up from N1.308t recorded in September last year, while its Net Interest income which stood at N443.0 billion at the end of the third quarter in 2023, rose impressively by 149 percent to N1.103 trillion in the period under consideration.
Expansions and mergers in the sector in 2024
The year saw the initiation of the merger between Unity Bank and Polaris Bank following approval from the Central Bank. This comes after Unity Bank has continually struggled to beef up its minimum capital requirements since 2017.
- These mergers show the resilience of the banking sector and how entities can thrive despite the challenges they face.
- Banking sector is the highest recipient of foreign capital importation.
- According to data released by the Nigerian Bureau of Statistics, NBS, the banking sector recorded the highest inflow, attracting $579.48 million in Q3 2024.
- This highlights the continued role of the financial sector in attracting foreign investment.
The financing sector came second, receiving $294.55 million in that same time period.
2025 and beyond for the banking sector
As per Statista, the net Interest Income is expected to exhibit a steady annual growth rate (CAGR 2024-2029) of -12.97%, resulting in a market volume of $29.14bn by 2029. This data shows a shrinking sector and investors need to be wary about this.
While the numbers still show a profitable sector, the question is till when? With crypto adoption blooming in the country and widespread adoption of Fintechs experts thought banks would lose their relevance. This is yet to happen. That being said, except something drastic happens in the Nigerian Stock market, projections show that banking equities should do well come 2025. Will that be the case? Well, only time can tell.