Why it was a Hellish Week for These Nigerian Banks


July has come and gone and investors are still trying to figure out what exactly happened. For those who have shares in banks it was a hellish week as the bears came out to pounce with their hang men. Apart from Wema Bank (which is actually priced at its year low), all banking stocks recorded a weekly decline in prices.

The Banking Index lost 7% this week, lost 14% in July and 10% in year to date.

The top decliners for the week included FBNH (10.39%), GUARANTY (9.49%), UBN (8.82%), ZENITHBANK (8.23%), and ACCESS (8.09%).

Why the drop?

According to Meristem

The massive decline in prices is primarily being driven by the current market state, while the expectations of weaker financial performances is partly contributory. This has resulted in most of the stocks being attractively priced. We do not believe that prices have bottomed out, and advise that investors time the market for position taking.

In other words, investors believe that the spate of poor results released by some banks are likely to continue next week further denting sentiments. The market is currently driven by emotional short term investors who basically react to any news, information or perception depending on how positive or negative they are.

This is probably an opportunity for long term investors who we believe should have done their homework. However, be ready for more headwinds as stocks are only likely to get lower and higher and lower and higher etc.  until things become clearer in the economy.

Nairametrics

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