Emmanuel OchayiShareholders in Nigeria’s tier 1 banks have witnessed a combined gain of N1.296 trillion during the first nine months of 2023. This performance has left investors astounded and eager to understand the driving forces behind this financial feat.
President Bola Tinubu’s administration, fresh policies, and a novel approach to exchange rates have contributed to this financial windfall. As inflation rates rise and concerns loom over the upcoming general elections, the Nigerian Stock Exchange (NGX) All-Share Index managed to defy the odds, closing the third quarter of 2023 with 29.52% increase, reaching a 15-year high.
Join our WhatsApp ChannelThe NGX’s performance didn’t go unnoticed on the African stage, with the exchange ranking second among the best-performing exchanges in Africa for a three-month duration.
A closer look at the banking sector reveals an even more astonishing story. The banking index skyrocketed by 59.57%, with the five major tier-one banks enjoying substantial gains. Zenith Bank Plc led the pack with a 31.04% increase in share price. GTCO Holdings Plc followed closely with a remarkable 49.78% gain, while FBN Holdings Plc saw a 50% surge in share price.
Access Holdings Plc experienced 85.29% price appreciation, and United Bank for Africa (UBA) Plc stole the show with 121.05% surge in share price.
Market experts have attributed these gains to favorable macroeconomic conditions, including rising interest rates. The banking sector, historically known to thrive in such environments, seems poised for an even brighter future.
Despite challenges such as stringent regulations, inflation, dollar shortages, and asset quality concerns on the horizon, analysts anticipate modest growth in bank earnings. This optimism is fueled by rising interest rates, non-interest revenue from FX revaluation gains, growth in nonbank businesses, and the expansion of digital banking.
However, Nigeria’s banking sector has defied expectations, providing shareholders with gains and hope for a prosperous future, despite the turbulent economic landscape.
Mr. Mike Eze, Managing Director of Crane Securities Limited who spoke to Nairametrics said: “Interest rates and bank profitability are connected, with banks benefiting from higher interest rates.”
Analysts at Coronation Research said: “We expect modest growth in earnings from the banks featured, driven by rising interest rates, a strong contribution from non-interest revenue derived from FX revaluation gains, growth in nonbank businesses and digital banking.”
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
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