Expert Analysis: Aggregate loans in the books of eight Nigerian banks expands to N30 trillion in the first half (H1) of the year

According to analysts at Vetiva Capital Management Limited, the strong growth in loan books was due to the translation of the foreign currency (FCY) components of bank loans.

In its banking earnings review, the analysts listed Accesscorp, FBN Holdings and United Bank for Africa as the biggest contributors to the improvement in the loan books during the period.

The banks surveyed are AccessCorp, Zenith Bank, United Bank for Africa, Fidelity Bank, Guaranty Trust Holding Company (GTCO), FBN Holdings, Stanbic IBTC Holdings and First City Monument Bank (FCMB).

The latest report indicated that the banks reported material forex revaluation of gains, which boosted non-interest revenue performance.

It noted that forex revaluation gains were still positive for all the coverage banks after netting forex-related losses from liabilities with GTCO, Zenith and UBA recording the largest gain to the tune of N355 billion, N354 billion and N348 billion.

Besides, customer deposits also rose to N58 trillion, representing 33 per cent higher than the figure reported in the full year, 2022 with Accesscorp, UBA and Zenith recording the largest increases.

According to the firm, customer deposits rose significantly primarily due to the translation of the FCY components of customer deposits, thereby pressuring interest expenses.

“Subsequently, Net Interest Margin (NIM) rose year on year for most of our coverage banks (Fidelity, Zenith, UBA and FBN Holdings) and declined for some banks (Accesscorp, FCMB, Stanbic IBTC) as the growth in access yield surpassed the corresponding increase in funding cost in Q2 while the reverse occurred on banks with slimmer NIM.

“The expansion in NIMs for our coverage banks is on the back of high current account and savings account mix after the translation of the FCY component of customer deposit and vice versa,” it added.

Meanwhile, despite the one-day holiday declared by the Federal government on Monday, October 1, 2023 to mark the Independence Day Celebration, a turnover of 2.4 billion shares worth N22.1 billion was recorded in 27,965 deals by investors on the equities sector of Nigeria Exchange Limited (NGX), up from a total of 1.3 billion units, valued at N17.9 billion that changed hands in 27,874 deals on September 29, 2023.

Also, the bourse rebounded from its three-week negative sentiments as gains in Airtel Africa (+8.5 per cent) and BUA Cement (+9.9 per cent) lifted the All-share index and market capitalisation by 0.1 per cent and 0.5 per cent to close the week at 66,454.57 and N36.510 trillion respectively, resulting in the Year-to-Date (YTD) return of +29.6 per cent.

All other indices finished higher except NGX CG, NGX Premium NGX Insurance, NGX Lotus ll, NGX Industrial Goods, NGX Growth and NGX Sovereign Bond which depreciated by 0.23 per cent, 4.9 per cent, 3.11 per cent, 0.60 per cent, 1.38 per cent, 1.55 per cent and 0.02 per cent respectively while the NGX ASeM and NGX Oil and Gas indices closed flat.

Further breakdown of last week’s transactions on the equities market showed that the financial services industry (measured by volume) led the activity chart with 1.2 billion shares valued at N9.7 billion traded in 12,897 deals, thus contributing 52.31 per cent to the total equities turnover volume.

The Healthcare Industry followed with 667.2 million shares worth N1.2 billion in 437 deals. The oil and gas industry ranked third with a turnover of 162 million shares worth N1.8 billion in 2,612 deals.

Trading in the top three equities namely Neimeth International Pharmaceutical Plc, Universal Insurance Plc and Fidelity Bank Plc (measured by volume) accounted for 1.2 billion shares worth N2.3 billion in 1,095 deals, contributing 50.4 per cent to the total equity turnover.

The report also indicated that the banking index (+1.43 per cent) and Consumer Goods (+0.2 per cent) indices closed in positive territory, while the Insurance (-3.1 per cent) and Industrial Goods (-1.4 per cent) indices declined. The oil and gas index was unchanged.

Analysts predict a brighter outlook in anticipation of increased investors’ bargain-hunting and repositioning ahead of the third quarter (Q3) earnings season and interim dividend payout by listed firms.

However, they added that the nation’s macroeconomic challenges remain a significant headwind for corporate earnings.

Vetiva Dealings and Brokerage said: “Access Corp is the last tier-I bank to be marked down for interim dividend and we saw buyers take a position on Friday lifting the stock by 20 kobo from its ex-dividend price of ₦15.85.

“Also, with forex gains from dollar-denominated assets still positive for the banks, we have continued to see buy-interest in the sector, closing the week as the best-performing sectoral index and we expect this to filter into the next trading session, while other sectors trade mixed.”

Cordros Capital said: “In the short term, we anticipate cautious trading in the domestic equities market due to the absence of significant positive catalysts to boost sentiments.

Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”

SCM Capital said: “Expectations for next week (this week) is a surge in investors’ activities as they position themselves strategically for the upcoming Q3, 2023 earning season. The focus is likely to remain on stocks that have showcased robust fundamentals, delivering impressive results throughout the initial half of the year.”

Further, a total of 898,301 units of exchange-traded products (ETPs) valued at N25.9 million were recorded in 107 deals compared to a total of 19,020 units valued at N2 million transacted in 91 deals during the preceding week.

Also, 46,199 units of bonds, valued at N46 million were traded in 23 deals down from a total of 80,697 units worth N82.9 million transacted in 15 deals during the preceding week.

Culled from TheGuardian