Banking stocks on the floor of the Nigerian Stock Exchange (NSE) have outperformed other stocks, lifting NSE all share index to record 19.53 percent gain year-to-date (YTD).
The banking index specifically recorded 40.9 percent appreciation year-to-date as at June 28, 2017. The sector apart from exhibiting high liquidity, had most of the shares listed under its segment recording appreciation in the value of their shares.
At the close of trade on 28 June, 26 banking stocks out of the 28 traded recorded price appreciation with 262.83 million units of their shares valued at N2.3 billion changing hands. The banking sector has also maintained a steady percentage of daily trade, accounting for over 60 percent of volume of shares traded in the first 26 weeks of 2017.
“The major reason banking sector stocks are doing well is because of liquidity,” Tosin Oyawale, a stockbroker says.
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“When PFAs or retail investors want to play in the market for short periods of time, they ask for shares that they can easily cash out when they need their money. Banking shares offer this opportunity since there are always investors who want to trade them. This has also led to their price appreciation over time,” he said.
Shares of three banks, Stanbic IBTC, UBA and Zenith are the best performing stocks in the banking sector as the second quarter of the year closes.
As at the close of trading Thursday, June 15, Stanbic IBTC shares had recorded price appreciation of N15.69 year-till- date. Similarly, the prices of GTB and Zenith Bank shares had appreciated by N12.00 and N8.50 respectively compared to the first day of trading in the year.
Stanbic IBTC currently holds a market capitalisation of N310 billion, a P/E ratio of 9.29, while Zenith’s market capitalisation is put at N719 billion, with N4.47 earnings per share 5.13 P/E ratio. GTB on the other hand, has a market capitalisation of N1.05 trillion with N5.16 earnings per share and 6.93 P/E ratio.
“These banks have a model that is working and delivering returns on investment,” said Oyawale
“If you look at their books you will realise that they have delivered value over the years, and with them, it’s a steady growth, that’s what the investors are looking at,” he noted.
The closest to the banking sector’s performance is the NSE 30 Index, which tracks the top 30 companies in terms of market capitalisation and liquidity on the exchange.
However, the Alternative Securities Market (ASeM) index however recorded the worst performance as it has lost 1.49 percent year to date.
The Alternative Securities Market is the NSE’s specialized board for emerging businesses – small and mid-sized companies with high growth potential. It gives such companies the opportunity to raise long-term capital from the capital market at relatively low cost for them to grow and institutionalise.