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Bank stocks shine in 2023

Nigerian banks can compete better with new capital base – S&P Global

Nigerian bank stocks have enjoyed a good ride in 2023, with most returning over 100 per cent year-to-date (YTD).

The NGX Banking Index, designed to provide an investable benchmark that captures the performance of the banking sector, has risen by 95.35 per cent, according to market data as of the close of trading on Tuesday, December 12.

This index comprises the most capitalised and liquid company house names like Access Corporation, ETI, Fidelity Bank, Jaiz Bank, Sterling Financial Holdings, Unity Bank, Wema Bank, UBA and Zenith Bank.

“In reaction to the announcement of the liberalisation of the foreign exchange market in June, we published our intention to raise our notional exposure to the bank sector.

“We took our exposure up from 16percent at the beginning of June to 33percent by late July.

“Re-running our numbers through our performance attribution model, we calculate that this decision has earned us an incremental 317 basis points (bps),” Coronation Research analysts said in their December 4 note to investors.

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Additional rally by 0.33percent on Tuesday after the week-open rally pushed the market higher. Still, the NGX Banking Index surpasses the NGX All Share Index (ASI) which is up same period by +40.30 percent.

“We anticipate continued positive trading, as sentiments from the last week still prevail. “We advise investors to invest in high-quality stocks with strong fundamentals backing them,” said Futureview research analysts in their December 12 stock recommendation. They asked investors to buy Access Corporation, Zenith, while holding UBA and FCMB Group.

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All the Nigerian banking stock returns are in green year-to-date (YtD). Market’s price list shows that UBA has risen most this year by +205.3percent, Sterling Financial Holdings (+181.4percent), while Access Corporation is up by 140percent.

ETI has also risen by 115.1percent this year, FBN Holdings (+112.4percent). FCMB Group has risen by 76.6percent, Fidelity Bank (+109.2percent), GTCO (+71.7percent), Jaiz Bank (+63percent), and Stanbic IBTC (+97.3percent).

Others are: Unity  (+161.8percent), Wema (+33.1percent), and Zenith Bank (+47.9percent).

“We expect buying interest to persist in the market (particularly the banking sector) driven by an optimistic outlook,” Meristem research analysts said in a recent note.