Since the Central Bank of Nigeria (CBN) announced a capital requirement increase for banks earlier in 2024, the market sentiment surrounding the banking sector has fluctuated.
The initial response to the recapitalization policy was cautious, turning bearish as concerns about mergers, acquisitions, and licensing changes grew.
These shifts led to a decline in the sector’s performance in the first half of the year. By the end of Q2 2024, the average year-to-date (YtD) return across the 13 listed banks had dropped to -2.48%, with a market capitalization of N6.5 trillion, a decrease of about N1.6 trillion from Q1.
The banking index saw a sharp decline of 7.47%, making it the worst-performing sector on the Nigerian Stock Exchange in the first half of 2024.
Analysts attributed this downturn to investor caution as speculation surrounding potential mergers and acquisitions heightened, raising concerns about sector stability.
However, as banks moved forward with public offers and rights issues after the first half of the year, investor confidence began to improve.
By the end of August 2024, the average YtD dip in bank stocks had narrowed to -1.20% from -2.48% at the end of June.
This trend continued as the banking sector rebounded, reaching an average YtD gain of 11.98% by September, 14.47% by October, and standing at 18.09% as of the close of trading on November 8, 2024.
Respective Bank’s Performance
Fidelity Bank: Following the completion of its N127.01 billion hybrid public offer and rights issue, Fidelity’s stock price has shown a robust recovery.
Starting from an initial YtD dip of -7.88% in Q1, the stock improved to -5.99% by midyear, then narrowed to -2.94% in August, and ultimately surged to a 37.33% YtD gain as of the close of trading on Friday, November 8, 2024.
This remarkable rebound reflects both renewed investor confidence and Fidelity’s resilience, building on its substantial 149.43% YtD gain in 2023.
FCMB Group: FCMB concluded a subscription offer for 15,197,282,219 ordinary shares at 50 kobo each at an issue price of N7.30 per share, generating gross proceeds of N110.94 billion and net proceeds of N108.117 billion.
- The offer, which opened on July 29, 2024, closed on September 4, 2024.
- By the end of August, FCMB’s share price on the NGX had risen to N7.70, above the offer price.
As of November 8, 2024, the share price has further increased by 30%, closing at N9.50, significantly higher than the initial offer price of N7.30.
GTCO: After completing a N392.49 billion public offer in August 2024, also saw a resurgence in its stock price.
- By September 2024, the stock had gained 18.52%, and by November 1, 2024, it surged to a 52-week high of N55.30 per share, bringing its YtD gain to 32.10%.
- This growth signifies a strong recovery from a 14.29% dip in the first half of the year, following an earlier Q1 2024 YtD gain of 29.63% and building on a robust 76.09% YtD gain in 2023.
The bank’s strong financial performance, with a 223% increase in pre-tax profit for the first half of 2024 and interim dividend of N1.00 per share, has helped restore investor confidence.
Zenith Bank: Zenith Bank’s share price saw a notable improvement following its N290 billion hybrid offer launched on August 1, 2024. The share price gained 3% intraday on the offer’s opening day.
- By the end of the extended offer date on September 23, the stock had climbed 13%, closing at N37.50 per share.
- As of last trading on Friday, November 8, 2024, it reached N42, reflecting a 15% gain from the public offer price of N36.50.
The bank’s impressive financial performance, highlighted by a pre-tax profit of N1.003 trillion for the first nine months of 2024, has further boosted market sentiment.
Access Holdings Plc: On July 7, 2024, Access Holdings Plc announced it had received approval from the Securities and Exchange Commission to execute a rights issue of 17.772 billion ordinary shares at N19.75 each, based on 1 new share for every 2 held as of June 7, 2024.
- Issued at a premium compared to the June 7 qualifying date price of N17.25, the rights issue offered shareholders an attractive opportunity.
- Following the announcement on August 1, the share price gained 2.63% intraday.
By the close of trading on November 8, 2024, the stock had risen to N24.65 per share, marking a 24.81% increase over the offer price of N19.75.
FBN Holdings (FBNH): On November 4, 2024, FBN Holdings commenced a rights issue aimed at raising N149.56 billion to bolster the capital base of its primary subsidiary, First Bank of Nigeria Limited.
Since the offer’s launch, the share price has risen by 1.87%, closing at N27.3 as of November 8, 2024.
UBA: The bank’s recent submission of a rights issue application, aimed at raising N238 billion, is anticipated to bolster its stock price once launched.
- In 2023, UBA’s share price recorded an impressive 238% YtD gain.
- As of the close of trading on Friday, November 8, 2024, UBA’s stock has achieved a 20.86% YtD gain, trading at N31.00 per share, reflecting resilience as the bank prepares for its forthcoming rights issue.
Overall, the recent public offers and rights issues by Nigerian banks have introduced both volatility and opportunity to the banking sector.
- While the recapitalization requirements present challenges, the strong stock performance following these offers indicates growing investor confidence.
- As of November 2024, banking stocks have shown significant improvement post-offer.
However, while there is room for further growth, it remains unlikely that the sector will surpass its exceptional share price performance of 2023.