• Sterling Bank, UBA, Accesscorp gain 150%, 126%, 93% respectively
• Operators see robust final dividend payout in full year

The Nigerian Exchange Limited (NGX) banking index appreciated by 61.9 per cent in nine months (Year-To -Date), surpassing the overall All-share index that measures the performance of listed firms, data from the exchange has revealed.

Specifically, Year-to-Date assessment of the banking index of the exchange showed that the sector has recorded 61.86 per cent return to investors as of close of transactions on October 6, 2023, while the index recorded 29.66 per cent growth within the period.

The growth recorded by the banking index within the nine-month period is higher than negative 6.62 per cent seen in the corresponding period in 2022 (January-September 2022) an indication that the banking industry has improved despite the harsh operating environment.

The Guardian leant that the stocks, which contributed to the performance are Sterling Bank, United Bank for Africa (UBA), Accesscorp, Fidelity Bank, Ecobank TransNational Incorporated (ETI), GTCO, FBN Holdings and Zenith Bank.

A breakdown of the performance showed that Sterling Bank recorded the highest return on investment of 150 per cent in the sector, followed by UBA with 126 per cent capital appreciation. Fidelity Bank trailed, improving by 93 per cent while Accesscorp and GTCO appreciated by 89 per cent and 57 per cent. ETI recorded 51 per cent growth so far. FBNH and Zenith rose by 49 per cent and 33 per cent.

Also, the banking sector also rose by 1.43 per cent at the end of last week’s transactions on the equities sector of the NGX, emerging the best performing index last week.

As part of efforts to achieve a convergence between the official and the black-market exchange rates of the dollar, the present administration has allowed the naira to weaken. This has enabled lenders that have some of their loans denominated in the dollar to make bumper harvest.

Further, rising interest rates and naira devaluation, following the apex bank’s resolve to keep increasing rates to fight inflation, have given banks the leverage to charge more for loans and advances.

Most tier-one banks also have a large foreign asset, which have given them the leverage to make many gains from Forex, coupled with the income from yield from the fixed market.

Moreso, improved investors’ confidence, which has spurred activities in the equities market, also supported the banking sector’s performance within the period under review.

Indeed, a review of Nigerian banks’ foreign exchange assets revaluation gains showed that banks recorded close to N2 trillion in the first half of 2023, up from N70 billion achieved by top 12 banks listed on the exchange in the corresponding period in 2022.

Recall that top five tier-one Nigerian banks by market capitalization, that is FBN Holdings, United Bank for Africa (UBA), GTCO, Access Holdings and Zenith Bank posted combined gross earnings of N4.2 trillion in their 2023 half-year (H1) operations.

The H1, 2023 figure posted by the five banks is close to N4.5 trillion achieved in the 2022 full-year operations, despite the macroeconomic challenges.

A breakdown of the gross earnings of the banks for the 2023 H1 performance showed that UBA recorded the highest figure amounting to N981.8 billion as against N372.4 billion posted in the corresponding period in 2022, representing 164 per cent growth. Zenith Bank followed with N967.3 billion, 139 per cent higher than N404.8 billion recorded in H1, 2022.

Access Bank ranked third with 58 per cent increase in gross earnings to N940 billion from N591.8 billion achieved within the same period in 2022. GTCO trailed with N672.6 billion, representing 181 per cent growth when compared to N239.3 billion recorded previously while FBN Holdings’ gross earnings also rose from N359.2 billion to N656.6 billion representing an increase of 82.8 per cent.

Operators argued that the sustainability and determination of the current government’s efforts to grow the economy by addressing forex issues, high inflation and encouraging private sector participation in the economy, coupled with deliberate efforts to grow the real sector would continue to improve banks’ performance.

Reacting on the development, Head Equity, Planet Capital, Dr. Paul Uzum, attributed the rise in banking stocks to strong performance driven by prudent balance sheet management by the banks that invested a substantial part of their reserves in dollar earning assets over the period of prolonged Forex scarcity.

According to him, the devaluation of the Naira resulted in huge profits for the banks in half year (H1), 2023. He said GTCO, Zenith Bank and UBA made the most of these earnings to the tune of N355 billion, N354 billion and N348 billion.

“GTCO and Zenith increased their interim dividend from 30 kobo to 50 kobo while UBA increased theirs from 20 kobo to 50 kobo. Fidelity bank, which had never paid an interim dividend before, delighted investors with 25 kobo interim.

“As we move towards the end of the year 2023, we expect the market to price in these performances and reward the banking stocks. Investors also expect increased final dividends as well from the banks,” he said.