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Equities Market Sheds 2% on Negative Investor Sentiment

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Nigerian Exchange Limited - Investors King
  • Equities Market Sheds 2% on Negative Investor Sentiment

The positive performance recorded by the Nigerian stock market the previous week could not be sustained last week as investors’ confidence weakened following poor results by some companies.

The market had rebounded the previous week as investors were optimistic companies would soon begin to declare dividends for the 2016 financial year. As a result, the Nigerian Stock Exchange (NSE) All-Share Index (NSE ASI) had appreciated by 0.40 per cent.

However, the market returned to the red zone last week with the NSE ASI declining by 2.0 per cent to close at 25,802.54, while market capitalisation ended at N8.892 trillion. Many investors got high disappointed that Forte Oil Plc, which was the first firm to declare 2016 full year results, posted a decline of 50 per cent in profit after tax and neither recommended a dividend nor bonus issue. Similarly, leading soft drink bottling firm, Seven-Up Bottling Company Plc recorded a loss of N2.9 billion for the nine months to December 31, 2016. The market was bearish for four days and recorded an appreciation only one day. At the end of week, the index shed 2.0 per cent.

Similarly, all other Indices finished lower during the week with the exception of the NSE Premium Index and NSE Industrial Goods Indices that appreciated by 0.15 per cent and 4.37 per cent respectively, while the NSE ASem Index closed flat. The NSE Oil & Gas Index led the losers with a decline of 5.0 per cent.

Daily Market performance

The market opened for the week on a bearish note as investors’ sentiments remained weak. The Nigerian Stock Exchange (NSE) All-Share Index fell by 0.42 per cent to close at 26,217.18. Market capitalisation shed same margin to close lower at N9.02 trillion.

The depreciation recorded in the share prices of Oando, GTBank, Zenith Bank, Dangote Cement and Access Bank were mainly responsible for the loss recorded on Monday.

Investors traded 143.52 million shares worth N2.19 billion in 2,139 deals. The first five stocks that drove volume included AIICO (56.8 million), Transcorp (16.0 million), UBA (7.75 million), FBN Holdings (7.64 million) and Fidelity Bank (7.4 million). Analysts at SCM Capital Limited said they expected the market to exhibit another depressed mood the following day.

“We expect market to exhibit another depressed mood at tomorrow`s session due to weak volume. However, the current valuation presents an attractive entry opportunities for risk tolerant investors to position ahead of the earnings season,” they had said.

In line with the negative outlook, the equity market slumped further on Tuesday with the NSE ASI, depreciating by 0.69 per cent to close at 26,036.24. Losses by Nestle, GTBank, Guinness, Nigerian Breweries and Access Bank accounted for the decline. Consequently, the market closed the first month of 2017 with a decline of 3.12 per cent.

The total value of stocks traded on Tuesday N2.76 billion up by 265.5 per cent from N755.89 million of the previous day, while total volume of stocks traded was 205.77 million in 2,914 deals.

The market prolonged the bearish mood on Wednesday with the NSE ASI declining below the 26,000 psychological mark. Specifically, the index closed lower at 25,903.55.

Investors’ sentiments remained dampened by weak corporate earnings by some companies. Market operators said investors were being cautious as they await more corporate results for 2016 full year and quarterly performance. Already, Guinness Nigeria Plc, a leading brewing firm had announced a loss of over N4.6 billion for the half year to December 31, 2016. Similarly, Seven-Up Bottling Company Plc, declared a loss of N4.8 billion for the nine months ended December 31, 2016.

Forte Oil Plc, which announced its full year results ended December 2016, posted a drop of 50 per cent in profit after tax and did not declare a dividend for the year.

“These results are serious concerns for shareholders who are not enthusiastic about increasing demand for stocks for now until positive results begin to come in to the market,” a stock dealer said.

In all, only nine stocks appreciated while 25 stocks depreciated on Wednesday led by Forte Oil with 5.0 per cent to close at N67.66 per share. Guinness Nigeria Plc and Unilever Nigeria Plc trailed with a decline of 4.9 per cent apiece.

Forte had posted a revenue of N148.6 billion in 2016, up by 19.3 per cent from N124.6 billion in 2015. However, profit before tax fell by 24 per cent to N5.3 billion, from N7.0 billion, while profit after tax declined by 50 per cent to N2.9 billion, compared with N5.8 billion recorded in 2015.

The market gained for the first time on Thursday as the index appreciated by 0.13 to close at 25,936.24 as bargain hunting in banking stocks drove the index northwards. Gains recorded by UBA, GTBank, Guinness, Access Bank and Zenith Bank bolstered trading to close in green.

Performance across sector was broadly bullish as all indices closed in the green save for the NSE Oil & Gas Index which declined 1.6 per cent as losses in Forte Oil Plc (-9.7 per cent) and Seplat (-0.03 per cent) more than offset gains in Oando (+4.8 per cent), while the NSE Industrial Goods Index closed flat. The NSE Banking Index gained the most, rising by 0.9 per cent on account of buying interest in UBA (+2.9 per cent) and Zenith (+1.4 per cent).

Similarly, the NSE Insurance and NSE Consumer Goods indices closed 0.6 per cent and 0.02 per cent.

Market turnover

Meanwhile, market turnover stood at total turnover of 1.153 billion shares worth N8.032 billion in 12,783 deals, compared with a total of 990.584 million shares valued at N18.823 billion that exchanged hands the previous week in 14,917 deals.

But the Financial Services Industry maintained the number position on the activity chart with 841.221 million shares valued at N3.065 billion traded in 7,102 deals; thus contributing 72.93 per cent and 38.16 per cent to the total equity turnover volume and value respectively. The Services Industry followed with 91.826 million shares worth N139.497 million in 265 deals. The third place was occupied by Industrial Goods Industry with a turnover of 67.010 million shares worth N247.141 million in 510 deals.

Trading in the top three equities namely – Continental Reinsurance Plc, FBN Holdings Plc and Med-View Airline Plc accounted for 381.262 million shares worth N788.588 million in 1,008 deals, contributing 33.05 per cent and 9.82 per cent to the total equity turnover volume and value respectively.

Price gainers and losers

The price movement chart showed that 23 equities appreciated in price last week, lower than 29 equities of the previous week. Conversely, 37 equities depreciated in price, compared with 30 equities of the previous week, while one 115 equities remained unchanged lower than 116 equities recorded in the preceding week.

Caverton led the price gainers with 15.9 per cent, trailed by Lafarge Africa Plc with a gain of 9.8 per cent. Unity Bank Plc appreciated by 8.1 per cent, just as Mobil Oil Nigeria Plc and Seven-Up Bottling Company Plc garnered 4.3 per cent and 3.8 per cent in that order.

Other top price gainers included: United Capital Plc (3.2 per cent); May & Baker Nigeria Plc (3.0 per cent); Sterling Bank Plc (2.7 per cent) and Guinness Nigeria Plc (2.4 per cent).

Conversely, Forte Oil Plc led the price losers with 15.1 per cent, followed by Neimeth International Pharmaceuticals Plc with 15.0 per cent. UACN Property Development Company Plc went down by 13.8 per cent, while Total Nigeria Plc and Diamond Bank Plc dipped by 10.3 per cent and 10.1 per cent in that order.

Nestle Nigeria Plc, Wema Bank Plc and Continental Reinsurance Plc shed 9.3 per cent and 9.0 per cent respectively. Custodian and Allied Plc and UAC of Nigeria closed the week 7.5 per cent and 7.3 per cent lower in that order.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Finance

Currency Outside Banks Increases By 66.2% As Nigerians Shun Formal Banking Channels

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New Naira notes

A recent data has revealed that currency outside banks increased by 66.2 percent in September 2024.

To this end, money outside traditional banking channels rose to N4.02 trillion compared to N2.42 trillion reported in September 2023.

This represents an increase of N1.60 trillion in just one year.

This was revealed in the Money and Credit Statistics data of the Central Bank of Nigeria.

According to the data, on a month-on-month basis, currency outside banks grew by 3.8 percent in September 2024 from August’s figure of N3.87 trillion, translating to an increase of N147.9 billion.

The trend suggests a growing inclination among the public to retain cash outside formal banking channels, a shift that could impact banks’ liquidity and shape monetary policy dynamics.

The CBN data further shows that a considerable proportion of Nigeria’s currency is held outside the banking system.

In September 2024, approximately 93.1 percent of currency in circulation was outside banks, a rise from 87.5 percent recorded in September 2023.

This shift may reflect limited trust in banking services, inflationary pressures, or a structural dependence on cash in Nigeria’s largely informal economy.

Such a high percentage of currency outside banks poses potential challenges for channelling funds into productive investments, potentially hindering economic growth.

The CBN report also highlights a parallel rise in overall currency in circulation, which encompasses both bank-held and outside cash.

In September 2024, currency in circulation rose beyond 56.1 percent year-on-year to reach N4.31trn, up from N2.76trn in September 2023, reflecting an increase of N1.55trn.

This indicates that the volume of currency retained outside the banking sector outpaced the total released for circulation within the past year.

Compared to August 2024, currency in circulation rose by 4.0 percent month-on-month, adding N166.2bn from the previous figure of N4.14trn.

Earlier in September, the CBN announced plans to sanction banks that fail to dispense cash through their automated teller machines, as part of efforts to improve cash availability in circulation.

The CBN also revealed plans to release an additional N1.4 trillion into circulation over the next three months to ease cash flow within the banking system.

This strategy aims to ensure that ATMs and bank branches have sufficient cash, addressing ongoing challenges faced by customers over cash shortages.

In related developments, it was observed that Nigeria’s money supply grew significantly by 62.8 percent year-on-year in September 2024, despite the Monetary Policy Committee’s tightening stance intended to manage excess liquidity to control inflation.

According to CBN data, M3 reached N108.95 trillion in September 2024, up from N66.94 trillion in the same period last year.

On a month-on-month basis, money supply rose by 1.6 percent, increasing from N107.19trn in August 2024.

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Banking Sector

Zenith Bank Achieves Triple-Digit Growth, Revenue Surges 118% to N2.9 Trillion

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Zenith Bank Plc has announced its unaudited results for the third quarter ended 30 September 2024, recording a remarkable triple-digit growth of 118% from N1.33 trillion reported in Q3 2023 to N2.9 trillion in Q3 2024.

This performance underscores the Group’s resilience and market leadership in spite of the challenging macroeconomic environment.

According to the Bank’s unaudited third quarter financial results presented to the Nigerian Exchange (NGX), the triple-digit growth in the topline also led to an increase in the bottom line, as the Group recorded a 99% Year on Year (YoY) increase in profit before tax, growing from N505 billion in Q3 2023 to N1.0 trillion in Q3 2024.  Profit after tax equally grew by 91% from N434.2 billion to N827 billion in the same period.

The growth in the topline was driven by the expansion of both interest income and non-interest income. Interest income saw a notable 190% rise to N1.95 trillion, attributed to the high-yield environment.

Non-interest income rose by 41% to N856 billion, bolstered by substantial growth in fees and commissions, which highlights the strength of Zenith Bank’s retail growth and the robust performance of its digital channels during the reporting period.

The robust increase in profitability reflects the Bank’s focus on operational efficiency and strong risk management practices. Earnings per share (EPS) nearly doubled, rising to N26.34 from N13.82 in Q3 2023, underscoring Zenith Bank’s strong value creation for shareholders.

The Bank’s balance sheet grew significantly, with total assets growing by 49% to N30.4 trillion, largely supported by customer deposits, which rose by 42% to N21.6 trillion.

This growth in deposits was broad-based across corporate and retail segments, highlighting the Bank’s deepening reach and customer loyalty.

Gross loans increased by 46% to N10.3 trillion, underscoring the commitment to supporting strategic sectors in the economy.

Capital adequacy ratio remained strong, improving to 21.9%, well above regulatory requirements. The return on average equity (ROAE) stood at 37.8%, up from 35.1%, while return on average assets (ROAA) also improved to 4.3% as Zenith Bank maximized its asset base.

Cost of funds increased to 4.3%, reflecting the broader market trend of rising interest rates, while the cost of risk was maintained at 7.3%, underscoring the Bank’s proactive approach in provisioning for credit risk.

The Bank’s cost-to-income ratio rose to 39.5%, reflecting the impact of strategic investments in technology and capacity building aimed at supporting long-term growth, even as it continues to strive for greater operational efficiency.

Zenith Bank’s asset quality remains a cornerstone of its strength, with a non-performing loan (NPL) ratio of 4.5%, within regulatory limits. A high coverage ratio of 198.4% underscores the Bank’s disciplined approach to risk management, positioning it for resilience in the face of market volatility while supporting stable loan growth.

Zenith Bank remains steadfast in its commitment to sustainable growth and value creation. The Bank launched a capital raise program on August 1, 2024, consisting of a combined Rights Issue and Public Offer.

This capital raise was driven by the Central Bank of Nigeria (CBN)’s recapitalization directive for commercial banks issued in March 2024. While the Bank awaits final capital verification approvals from authorities, the fundraising exercise was successful, reflecting strong confidence in Zenith Bank’s brand.

The additional capital will enhance the Bank’s ability to expand its product offerings, deepen its penetration in strategic sectors, boost lending to the real sector and pursue its African and global expansion plan.

In furtherance of this, the Bank in September 2024 received regulatory approval for the establishment of a Zenith Bank branch in Paris, France, which is fully operational and will enhance the Bank’s product offerings in international markets.

With a strengthened capital base, Zenith Bank is well-positioned to navigate the evolving economic landscape, while putting best-practice sustainability standards at the heart of its business.

The Bank will also continue to prioritize opportunities that enhance stakeholder value and a strong compliance and corporate governance culture, which will reinforce the its leadership position within Nigeria’s financial sector and drive long-term growth.

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Banking Sector

UBA Expands Footprint in the Middle East with New Subsidiary in Saudi Arabia

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UBA House Marina

Africa’s Global Bank, United Bank for Africa (UBA) Plc, has set the wheels in motion to expand its operations in the Middle East with plan ongoing to open a subsidiary in Saudi Arabia, its largest economy.

This move which is expected to happen within the next year will mark the bank’s second subsidiary in the Gulf Region, following the expansion of its business to the United Arab Emirates in 2022.

UBA’s Group Deputy Managing Director, Muyiwa Akinyemi, who disclosed this during a panel session during the 8th Edition of the Future Investment Initiative(FII) in Riyadh, Saudi Arabia and in an interview with Arise TV, underscored the bank’s strategic commitment towards fostering Africa’s growth through infrastructure development, youth empowerment, and sustainable partnerships across key global markets.

He said, “Opening a presence in Saudi Arabia represents the next step for us in connecting the Africa-Gulf region. We are excited to bring UBA’s expertise in financial services to Saudi Arabia, where we aim to facilitate knowledge transfer and create strong economic linkages. This venture will further enable us to access Saudi expertise in food security, energy transition, and sustainable practices, which are all critical for Africa’s continued development.”

While emphasising the importance of Africa as a strategic investment destination for long-term capital, he said, “Africa’s infrastructure deficit is an opportunity for investors worldwide. Our pitch to the Gulf and Southeast Asia emphasizes that Africa must be part of their investment horizon. Today, food security is paramount as our population expands.

Akinyemi also highlighted the bank’s dedication to nurturing Africa’s youth talent through entrepreneurship. “Guided by our Group Chairman’s efforts with the Tony Elumelu Foundation, UBA is committed to supporting young entrepreneurs in tech, agriculture, and entertainment, which are all burgeoning sectors in Africa. With such a young and dynamic population, we see enormous potential for innovation and growth.”

He also reiterated the bank’s continuous support for Small and Medium Enterprises (SMEs) in Africa and beyond as he outlined the bank’s commitment to these businesses, which he referred to as key players in the African economy and vehicles for employment and economic growth.

“SMEs are the backbone of economic development in Africa. They contribute significantly to job creation and value chains, particularly within Nigeria. Over the last year, UBA has committed billions to support SMEs across Africa, and our network of over 20 countries enables us to make a substantial impact.”

During the panel discussions, Akinyemi took time to emphasize UBA’s longstanding experience on the continent as it navigates an ever-evolving investment landscape, adding that “As investors, we focus on infrastructure and sustainable projects that encourage economic prosperity while addressing pressing issues such as talent migration. Our goal is to ensure that people can thrive in Africa without needing to relocate. By investing in local talent and fostering growth sectors, we contribute to building the next generation of global innovators right here in Africa.”

The DMD further articulated UBA’s approach to risk management on the continent, emphasizing that the bank’s 75-year history has uniquely equipped it with insights and strategies to navigate diverse markets.

“With over seven decades of experience, Africa is what we know, and that knowledge allows us to manage risks effectively. We see tremendous opportunities in various sectors across the continent, and our continued investments are driven by a commitment to bring economic empowerment to communities, increase GDP, and improve socioeconomic quality. Our anniversary is a celebration of UBA’s legacy of contributing to Africa’s progress. We look forward to leveraging this milestone to drive even greater impact across sectors and empower future generations,” he said.

United Bank for Africa Plc is a leading Pan-African financial institution, offering banking services to more than forty-five million customers, across 1,000 business offices and customer touch points in 20 African countries. With presence in New York, London, Paris and Dubai, UBA is connecting people and businesses across Africa through retail, commercial and corporate banking, innovative cross-border payments and remittances, trade finance and ancillary banking services.

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