Bank stocks rose Thursday as investor sentiments improved after the Central Bank of Nigeria (CBN)‘s blockbuster hike in interest rates.
The banking index, which tracks the share price movement of all publicly-listed banks, rose 1.22 percent on the day to emerge the best performing sector. The index outperformed the broad market which was up 1.06 percent, according to data from the Nigerian Exchange Group.
United Bank for Africa (UBA), jumped the most since December 8, 2021 following a 3.27 percent gain.
Guaranty Trust (GTCO) jumped by the most in one month (2.68 percent). Access gained 1.0 percent, snapping two straight days of losses while Zenith Bank hit its highest level in a week (1.06 percent).
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First Bank also rose the most in a week with a 1.90 percent gain while Ecobank was up 1.28 percent on the day.
Analysts had forecast bank stocks to rise in the coming months following the 150 basis points hike in interest rates by the CBN on Tuesday, the first increase in rates in six years.
Higher interest rates bode well for banks who invest heavily in government securities and can also reprice their assets higher on the back of the hike.
The low interest rate environment had subdued banks which have returned only 4 percent since January as at May 26. That’s six times less than the average stock market return of 24 percent in the same period.