Banking sector stocks are likely to continue their poor run in coming weeks due to uncertainties in the economy, analysts have said.
Equities have performed mostly negatively this year with the Nigerian Stock Exchange All-Share Index year-to-date return at – 16.86 per cent.
Of the sectoral indices, the NSE Banking Index is one of the worst performing, down by -18.75 per cent year-to-date. Only the NSE Consumer Goods Index is worse at -21.87 per cent year-to-date.
Reviewing the performance of the banking sector last week, analysts at Meristem Securities Limited said the MERI-Bank Index had declined for the third straight week.
It said, “The banking sector recorded its third consecutive Week-on-Week loss, returning -2.50 per cent to peg the sector’s YtD return at -19.32 per cent.”
Last week, six of the bank stocks recorded gains, compared to eight losers, a development the analysts said pegged the sector’s breadth at 0.75x. FCMB was the only ticker that traded flat.
They noted that Skye Bank Plc led the advancers, after gaining 17.59 per cent, with Wema Bank Plc, Fidelity Bank Plc and Stanbic IBTC Holdings Plc also featuring on the gainers’ chart after recording appreciations of 11.25 per cent, 4.80 per cent and 3.94 per cent, respectively.
On the other hand, the decliners for the week included Unity Bank Plc (-12.96 per cent), Zenith Bank Plc (-5.91 per cent), Ecobank Transnational Incorporated Plc (-5.31 per cent), Sterling Bank Plc (-5.14 per cent), and Union Bank of Nigeria Plc (-5.12 per cent).
“During the week, few of the sector stocks recorded their year lows, as the general consternation in the market continue to pressure market returns. However, the pressure exerted on the sector’s stocks did not persist for the entire week,” the Meristem analysts said.
“We do not expect sector stocks to recover in the coming week, and still expect prices to remain under pressure in the short-term while uncertainties still loom large.”
The analysts also pointed out the liquidity challenges in the fixed income market, noting that the money market had recorded an all-time high average of 103.08 per cent on Wednesday, owing to dearth of liquidity in the financial system.
“We believe this was largely driven by the enforcement of the treasury single account by the Federal Government. Rates, however, moderated as the CBN’s net standing lending facilities was utilised by financial institutions, with the net value rising to N211.95bn. Consequently, the money market average rate pared to 8.58 per cent at the end of the week,” they said.
They added that activities in the Inter-bank space were also constrained by the liquidity crunch, as average NIBOR traded as high as 36.38 per cent during the week. Subsequently the NIBOR settled 10.29 per cent down week-on-week to peg the average rate at 16.61 per cent.
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