Despite grappling with macroeconomic challenges like a weak business environment, limiting opportunities for growth, inflation, and regulatory policies, analysts have said that the current growth of the banking index sector points to it sustaining its growth trajectory following positive sentiment by investors in 2024.
The banking sector achieved an impressive full-year 2023 growth of 114.89 per cent, on the NGX banking index reflecting investor confidence and heightened interest in banking stocks.
Zenith Bank, GTCo, Access Bank, UBA, FBNH emerged as top performers with most of them currently reporting above N1 trillion in market capitalization.
According to data from the Nigerian Exchange Limited, the NGX banking index has already gained 15.77 per cent or 141.52 points this current year from 897.20 points it opened trading on January 2, 2024, to 1038.72 points it closed on January 19th.
The analysts argued that the banking industry will continue to thrive in the interest rate hike environment, proposed recapitalization, and the windfall from the floating of the Naira.
Managing Director of Arthur Steven Asset Management Limited and former President of the Chartered Institute of Stockbrokers (CIS), Mr. Olatunde Amolegbe, predicts strong performance for the Nigerian banking sector in 2024.
He expects strong financial performance throughout the year, fueled by a combination of rising interest rates and innovative non-interest income strategies.
Offering his perspectives, Executive Vice Chairman of Hicap Securities Limited, Mr David Adonri, sees the naira devaluation as a potential source of extraordinary windfall gains for banks.
“The resulting revaluation of foreign currency-denominated assets could significantly boost their profitability in the short term. This improved outlook might attract increased investor interest in the sector, further stimulating growth,” he said.
Analyst and Head of Research at FSL Securities Limited, Mr. Victor Chiazor projects a largely positive outlook for the Nigerian banking sector in 2024, with sustained investor interest.
Mr Chiazor anticipates continued positive earnings momentum for the banking sector in the new year, citing robust non-interest income streams, potentially arising from the proposed bank recapitalization exercise, as a contributing factor.
