- Equities Market Gains 3.9% as Investors Renew Buying Interest
The stock market made an unexpected recovery last week as investors embarked on bargain hunting in stocks perceived to have attractive valuation. After falling 17.8 per cent last year the market had opened the New Year on bearish note due to weak demand for stocks ahead of the general elections. However, some discerning investors decided to take advantage of prices of some stocks that had hit record lows.
Hence, the return of the bulls to the market leading to seven days of gain.
Consequently, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) appreciated 3.9 per cent last week to close at 31,005.17, while market capitalisation ended higher at N11.562 trillion.
Similarly, all other indices finished higher with the exception of the NSE Banking Index that depreciated by 1.04 per cent while the NSE ASeM index closed flat.
The NSE Industrial Goods Index led with 12.7 per cent gain, followed by the NSE Insurance Index with 5.5 per cent, while NSE Consumer Goods Index and NSE Oil & Gas Index went up by 2.7 per cent and 0.59 per cent in that order.
However, commenting on the market performance, analysts at Cordros Capital Limited said: “In spite of this week’s rally, our view continues to favour cautious trading pattern in the equities market amidst brewing political jitters ahead 2019 elections, and the absence of a positive market trigger. However, we the positive macroeconomic fundamentals to drive recovery in the long-term.
The Chief Executive Officer of the NSE, Mr. Oscar Onyema, had on Monday, explained why the market declined last year. He had said it was the trend globally as most emerging and frontier markets closed weaker. He noted that in Nigeria, the market would remain volatile in the first half (H1) of 2019 before it will recover in second half (H2).
“Accordingly, we anticipate volatility in equities market in H1 in 2019 with enhanced stability post-elections. We believe swift approval and implementation of the 2019 budget may have a positive impact on the companies’ earnings as well as consumer spending. Therefore, we anticipate a return of listings during the year with an uptick in market activity during the H2 of 2019,” Onyema said.
Also, last Tuesday, the market the maintained bullish trend with the NSE ASI rising 0.4 per cent to close at 30,583.21, while market capitalisation added N45.7 billion to close at N11.4 trillion.
The renewed demand has continued to boost prices of stocks. And buying interests in Dangote Cement Plc, Nigerian Breweries Plc among other bellwethers influenced the positive performance on that day.
But Neimeth International Pharmaceuticals Plc led the price gainers’ chart with 9.4 per cent, trailed by NEM Insurance Plc with 9.7 per cent. Sovereign Trust Insurance Plc went up by 9.0 per cent, while Royal Exchange Plc and Jaiz Bank Plc chalked up 8.3 per cent and 8.0 per cent respectively.
PZ Cussons Nigeria Plc, Union Diagnostic & Clinical Services Plc and Wema Bank Plc garnered 7.7 per cent, 7.4 per cent and 5.1 per cent in that order. Cement Company of Northern Nigeria Plc and Forte Oil Plc appreciated by 4.5 per cent and 2.5 per cent respectively.
Conversely, Etranzact Plc led the price losers with 9.8 per cent, trailed by Resort Savings and Loans Plc with 9.6 per cent, just as Cornerstone Insurance Plc shed 9.0 per cent. NPF Microfinance Bank Plc went down by 8.1 per cent, while First Aluminium and AXA Mansard Insurance Plc depreciated by 6.0 per cent and 4.6 per cent in that order.
By Wednesday, the market had recovered N235 billion in three days following gains recorded by bellwether stocks. The market capitalisation rose from N11.124 trillion to N11.329 trillion in three days, while the NSE ASI rose 2.1 per cent from 29,830.70 to close at 30,460.68 in the three days.
However, on Wednesday alone, accounted for 1.07 per cent bolstered by gains in bellwether counters such as Guinness Nigeria Plc, Forte Oil Plc, Dangote Cement Plc and United Bank for Africa Plc among others.
A total of 24 stocks appreciated compared with 16 others that depreciated. Sovereign Trust Insurance Plc and Veritas Kapital Assurance Plc led the price gainers with 10 per cent apiece. Guinness Nigeria Plc followed with 9.6 per cent, just as Honeywell Flour Mills Plc and NEM Insurance Plc chalked up 9.5 per cent each. Custodian Investment Plc added 9.4 per cent just as Niger Insurance Plc, Union Diagnostic and Clinical Services Plc and University Press Plc garnered 9.1 per cent, 8.0 per cent and 5.2 per cent respectively.
UBA was also among the price gainers, rising 2.0 per cent or N0.15 to close at N7.45 per share as investors took position ahead of dividend announcement by the bank. The board of directors of the bank will meet soon to approved its 2018 financial accounts and recommend a final dividend for the year. Having paid an interim dividend for the half year, expectations are high that UBA will give a dividend that is higher than what was paid the previous year.
Beta Glass Plc led the price losers with 10 per cent trailed by Northern Nigerian Flour Mills Plc with 9.2 per cent. Resort Savings and Loans Plc shed 8.8 per cent, while PZ Cussons Nigeria Plc and Neimeth International Pharmaceuticals Plc 8.3 per cent and 4.6 per cent in that order.
Activity level was, however, mixed as volume traded increased 1.9 per cent to 305.8 million shares while value traded declined 35.3 per cent to N2.1 billion. The top traded stocks by volume were Diamond Bank (141.2 million shares), Fidelity Bank Plc (18.6 million shares ) and GTBank (17.4 million shares) while GTBank(N577.7 million), Zenith Bank (N357.1 million) and Diamond Bank (N296.6 million) were the top traded by value.
The stock market appreciated further on Thursday as the bulls consolidated their hold on the market. As a result the NSE ASI appreciated 0.58 per cent to close higher at 30,137.53, while market capitalisation added N64.4 billion to end at N11.2 trillion.
Buying interest in Zenith Bank Plc, Dangote Sugar Refinery Plc and Stanbic IBTC Holdings Plc propelled the positive performance. However, Cement Company of Northern Nigeria Plc led the price gainers with 10 per cent, trailed by Ikeja Hotel Plc with 9.3 per cent. Royal Exchange Plc and C & I Leasing Plc garnered 9.0 per cent apiece. NEM Insurance Plc, AXA Mansard Insurance Plc and United Capital Plc chalked up 8.6 per cent, 8.3 per cent and 8.0 per cent respectively.
Conversely, Newrest ASL Services Plc led the price losers with 9.4 per cent followed by Veritas Kapital Assurance Plc with 9.0 per cent. Neimeth International Pharmaceuticals Plc shed 8.5 per cent, just as First Aluminum Nigeria Plc went down by 8.3 per cent.
Activity level also strengthened as volume and value traded surged 126.7 per cent to 300.1 million shares and 199.2 per cent to N3.2 billion. Diamond Bank (100.7 million shares), GTBank (39.4 million shares ) and UBA (26.2 million shares ) were the top traded stocks by volume, while GTBank(N1.3 billion), Zenith Bank (N463.0 million) and Diamond Bank (N209.4 million) were the top traded by value.
Global Banking Sector Grows 40% Reviving Pandemic Losses in Just 12 Months
In 2020, the global banking sector took a hit following the economic impact of the coronavirus pandemic, which was reflected in the overall market capitalization. However, with the ongoing global recovery, the banking industry has regained most of the losses incurred during the health crisis.
According to data acquired by Finbold, in just 12 months between Q2 2020 and Q2 2021, the global banking sector’s market cap has surged 39.62%, adding €2.1 trillion from €5.3 trillion to €7.4 trillion. On the path to recovery, the market cap slightly plunged in 2020 Q3 to €5.2 trillion before gaining 17.3% the next quarter.
Among the Western European banks, Spain’s BBVA bank recorded the highest total shareholder return rate at 19.7% between April 2021 – July 2021, followed by Société Générale from France at 13.8%, while Banco Santander, also from Spain, ranks third at 12.1%. United Kingdom’s Barclays is the worst performer with a TSR of -8%. Data on the global banking sector’s market cap is provided by Banking Hub.
How banking sector sustained growth
The registered market capitalization is supported by the large-scale reopening of economies due to the vaccine rollout. Additionally, the banks, especially from major economies like the United States and Europe, have reaped from policies meant to cushion the economy from the adverse effects of the pandemic. Notably, the decisions by most banks to retain a low-interest-rate environment has been beneficial to banks.
Worth noting is that during the pandemic, banks found themselves in a tight spot. Historically, the banking sector has been considered the custodian of the economy but the pandemic also plunged the banks into a crisis. The banking sector’s profits were adversely affected considering they are bound to the business cycle and interest rates.
At the same time, banks also put in place measures like approaching loans with caution due to uncertainty in repaying which directly impacted profits. However, banks were tapped to facilitate the distribution of stimulus packages boosting their capital reserves in return.
Worth pointing out is that institutions like the European Central Banks allowed banks to continue using their capital buffers flexibly with a planned extension until 2022. With such moves helping banks sustain growth, it eliminates the worry of straining capital buffers while the health crisis is still impacting the banks’ balance sheets.
Furthermore, the crisis highlighted the need for banks to keep huge reserves of capital that can be activated in the wake of economic turmoil. Although most banks have historically relied on assets for future cushion, a crisis like the coronavirus calls for more capital because selling assets in such an environment is challenging.
Besides the policies, the banking sector recovery was partly aided by existing operational risk management arrangements. The pandemic tested all financial market participants and most leading banks successfully invoked business continuity plans. The plans ensured that the financial markets continued to run smoothly and orderly.
The sector’s recovery has also been accelerated by other factors like the increased adoption of pre-pandemic trends like digitalization and sustainability. Digitization of operations has been backed by consumers who are willing to conduct transactions online. At the same time, the digital shift has presented a competitive factor in the sector, with institutions that had established online presence benefiting the most.
Notably, the recovery was at some point under threat during the third quarter of 2020 amid concerns of the pandemic’s second wave. However, the sector sustained the gains with the rollout of the vaccine. Furthermore, moving into 2021, the industry appears not to be bothered by the Delta variant.
The future of the banking sector
By sustaining the market capitalization for two consecutive quarters, it can be assumed that the banking sector response to the health crisis is bearing fruits. However, it is still early to determine if the recovery is sustainable.
The rally will be tested, especially when central banks eliminate all the policies meant to cushion the economy. However, in the long run, banks will have to tailor their operations towards changing consumer behaviour.
How Stanbic IBTC is Transforming Nigeria’s Trade Landscape
Stanbic IBTC Bank PLC, a subsidiary of Stanbic IBTC Holdings PLC, has reiterated its commitment to fostering international trade and help the nation actualise its economic growth and development goals.
The Bank said it will continue to fine-tune its three-pronged approach to facilitating trade activities for clients. These are the development of bespoke financial solutions to help boost trade for clients; sponsorship of relevant trade shows that bring together stakeholders in global trade, including exporters and importers; and organisation of seminars and workshops to provide clients and other stakeholders with industry insights and enlighten them on global trade opportunities.
“Our goal is to become the ‘go-to’ Bank as far as global trade is concerned, with emphasis on Africa-China trade. This approach is of immense value to our clients and will help us achieve our fundamental purpose, which is to drive Nigeria’s growth,” Chief Executive Stanbic IBTC Bank PLC, Wole Adeniyi, said.
In line with this resolve, Stanbic IBTC organised a webinar on the African Continental Free Trade Area (AfCFTA). The webinar themed: ‘AfCFTA State of Play: Understanding Potential and Maximising Opportunities for the Customer’, emphasised Stanbic IBTC’s readiness to leverage the trade opportunities of the AfCFTA agreement to unlock business opportunities for its clients in the small and medium-sized enterprises (SMEs) sector as well as its corporate clients.
In 2019, Stanbic IBTC launched its Africa China Agent Proposition (now called Africa China Trade Solutions – ACTS) to boost trade transactions between Africa (Nigeria) and Asia, especially China, and help customers consummate the best business deals without having to travel to China.
According to Stanbic IBTC, ACTS will give customers exclusive access to an array of exporters in China through an accredited agent, Zhejiang International Trading Supply Chain Co Ltd, also known as Guamao.
Stanbic IBTC has held various fora as part of its sensitisation drive on ACTS and the currency swap agreement between Nigeria and China. These fora provided insight on how best to help clients and businesses leverage the opportunity and assess the impact of the Chinese economy on trade in Nigeria and Africa as a whole.
According to Wole, these workshops were geared towards deepening trade connections with the Chinese business community, thereby stimulating strong trade and business ties between Africa, with a special focus on Nigeria and China.
Stanbic IBTC Bank was a platinum sponsor of the 2021 Global Trade Review (GTR) West Africa Conference themed ‘Connecting the Region’s Trade Experts. The GTR West Africa Conference is an annual regional event for trade discussions and networking among leading practitioners in trade, export, and commodity finance to strategically explore the latest developments, strategies, and solutions needed to drive growth.
Experts have continued to commend Stanbic IBTC on this bold approach to educate its clients and investors about the benefits of AfCFTA, the Nigeria China currency swap deal, and the ACTS proposition, all geared towards helping clients unlock business opportunities.
Arise B.V., Equity Investor, Invests US$75 Million in Ecobank
A leading investor in financial institutions in Sub-Saharan Africa, Arise B.V. has made US$75 million perpetual non-cumulative AT1 capital investment in Ecobank Transnational Incorporated.
In a statement signed by Adenike Laoye, the Group Head of Corporate Communications, Ecobank, the fund will help optimise and improve ETI’s Tier 1 capital.
“This Basel III compliant instrument is the first AT1 instrument issued by ETI and a landmark transaction in the sub-Saharan Africa region. The investment will optimize and improve ETI’s Tier 1 capital by US$75 million,” the bank stated.
The latest investment showed Arise, an existing shareholder of Ecobank, has confidence in the bank’s future given the series of support and commitment the leading equity investor has provided to Ecobank in recent years.
Speaking on the new investment, Ade Ayeyemi, Group Chief Executive Officer of ETI, stated: “This investment by Arise is a testament to continued support and confidence from our shareholders; their commitment to, and belief in our strategy which we remain focused on executing to deliver value to our shareholders and excellence to our customers. Indeed, in addition to improving our double leverage ratio, it is also a good boost for the firm and its staff”.
Deepak Malik, Chief Executive Officer of Arise stated: “ETI is our primary banking investment in Francophone West Africa and Anglophone West Africa. We are very supportive of ETI’s growth ambitions and its ability to increase financial services to Agri, SMEs & retail customers. Our investment will also strengthen the balance sheet of ETI and provide additional risk capital”.
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