NSE: Banking Stocks to Offer Investors 88% Gain in 2018

By Modupe Gbadeyanka

Last year, the Nigerian Stock Exchange (NSE) was among the best performing markets in the world, growing by over 40 percent.

This was buoyed by the resilience demonstrated by banks listed on the local bourse amidst tougher operating conditions.

According to a report released by Afrinvest Research, banking stocks, driven by tier-one banks like GTBank, Zenith Bank, UBA and Access Bank, offered the best returns to investors in the equities market in Nigeria in 2017.

The banking sector of the Nigerian Stock Exchange, which was rated second best bourse in Africa and 11th best in the world, gave equity investors a 73.3 per cent return on investment in one year.

According to Afrinvest, investors showed significant interest in the four above banks, which led to Guaranty Trust Bank (GTB) Plc recording 64.9 percent price appreciation in the period, while Zenith Bank Plc recorded 73.8 percent price gain. Access Bank Plc increased its share value with a gain of 78 percent, while United Bank for Africa Plc emerged the most improved stock in terms of price appreciation with 128.9 percent growth.

According to analysts at Afrinvest Research, “Given the resilience demonstrated by the banks amidst tougher operating conditions, the banking index was unsurprisingly the best performing sector in 2017, up 73.3 percent.

“Performance of the banks remained driven by resilient earnings, supported by interest income (due to higher interest rate environment).”

In its outlook for 2018, Afrinvest Research said the banking index will again take the lead with 88.2 percent return with the Consumer Goods sector tipped to return 37 percent, like it did in 2017.

Last year, the Consumer Goods index gained 37 percent as increase in product prices and improvement in access to FX as well as the relative peace in the North Eastern part of the country, positively impacted earnings of companies in the sector.

Also, the Oil & Gas index gained 5.8 percent for the year, majorly due to performance of Upstream players – SEPLAT (+56.9%) and OANDO (+27.4%) – which was bolstered by the cessation of attacks on oil installations in the Niger Delta as well as improved global oil prices.

Sentiment towards the downstream players remained soft during the year, due to absence of reforms needed to revitalize the sector.

The overall performance of the Nigerian stock market has been attributed to renewed interest by domestic and foreign investors following stability in macroeconomic fundamentals recorded by Africa’s biggest economy in 2017.