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Big banks’ combine market valuation jumps to N4.11tr

THE Nigerian big balance sheets deposit money banks’ combined market value has inched higher to N4.11 trillion, according to data from the local exchange tracked by MarketForces Africa. Consequent to improved market sentiment, the banking index has jumped by 68.46% from the beginning of the year to date while market return spiked to about 27%.

In the midst of 2023 earnings releases, equities investors have continued to increase their positions across the Tier-1 banking segment, pushing their combined market valuation upward. Stock market analysts said the sharp increase recorded last week was aided by improved market sentiment and earnings expectations triggered by sounds of economic reforms.

Following the large devaluation of the naira, there is an expectation across Broadstreet that Nigerian deposit money banks with strong net foreign currency positions will boost their profitability with support from FX revaluation gains.

This bullish expectation is also supported by monetary policy tightening which positions local lenders as major beneficiaries of a high interest rates environment – strengthening the average industry’s net margin.

In their separate market review, equities analysts have maintained a positive outlook on big banks with a flurry of buy ratings on an expectation of an improved banking regulation going forward. This seemingly general sentiment popped up after the suspension of Godwin Emefiele as the Central Bank of Nigeria (CBN) governor.

Last week, the local bourse saw a nudge as market sentiment was boosted despite local investors remaining dominant players in the space since foreign portfolios exited their positions. The banking index spiked as FBNH saw a 25.63% gain in a week. The surge in the banking index was also supported by about 6.7% weekly gain recorded by Access Bank Plc.

Zenith Bank’s popularity among alpha seekers declined by 4%. However, GTCO Plc replaced the Adeogun Ajose headquarters lender as the most valued brand in the banking segment after a 16.67% gain in the week.

According to stockbrokers and investment firms, over the years, Nigerian banks have been underpriced below emerging markets peers. There has been an outcry that the local exchange often fails to reward performance – mostly by foreign analysts who attended corporate conference calls.

In the first quarter earnings season, the big 5 local lenders reported spikes in top line amidst headwinds, their separate audited reports showed despite the naira crisis and election holidays.

Trading data show that the year-to-date performance of Tier-1 banks (FBNH, UBA, GTCO, ACCESS, and Zenith) pushed the banking index upward as the Nigerian Bourse All-share index hit an 18-year high on Friday.

Market data shows that the big banks’ year-to-date return also raced ahead of other key indices.

In the just concluded week, GTCO gained momentum and the popularity of the orange brand among investors rose sharply. Now, it has surged above Zenith Bank. Zenith, the Bank of the Year, according to the Banker.

Zenith bank market valuation was down by 4% to N1.103 trillion in the last five trading sessions in the stock market. Its share price settled at N32.30 following healthy earnings growth in the first quarter of 2023.

As some analysts put it, there is so much to like about the Ajose Adeogun-based financial services behemoth. This includes sustained year-on-year growth in profitability.

It continues to rank higher in Tier-1 capital. Equities analysts said strong earnings performance over the year has helped the bank deliver its dividend policy. Zenith Bank remains most valuable in the local bourse with a strong buying rating.

Traded at N38.50 per share, GTCO Plc raced ahead as Nigeria’s most valuable financial services company. As of Friday, it was priced at N1.113 trillion on 29.43 billion outstanding shares in the market.

Following a fast and furious bargain hunting, FBNH worth about N712.521 billion, sold at N18.05 per share in the Nigerian bourse. The financial services stock gained weight due to a significant share acquisition by its erstwhile board chairman, Oba Otudeko.

Access Holdings, the largest financial services by total asset has also seen its market valuation increase amidst stock market rallies. However, Access Plc is lower at N652.254 billion as of Friday’s close than peers’ valuation –its unit price settled at N18.50 on Friday.

UBA’s valuation was the lowest in the category at about N509.571 billion. The bank share was priced at N13.55 on Friday.

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