The market value of Guaranty Trust Holding Company Plc and nine other banks rose to N7.87 trillion in 2024 as market capitalisation increased to N62.76 trillion on the stock market of the Nigerian Exchange Limited in 2024.
The NGX banking Index which witnessed mixed reactions in 2024, closed positive amid impressive corporate earnings by listed banks on the Exchange.
According to analysts, investors have been trading cautiously in the banking stocks on the backdrop of the recapitalisation policy of the Central Bank of Nigeria.
The CBN announced the banking sector recapitalisation exercise on March 28, 2024, and investors who invested in the banking stocks have maintained cautious trading.
In the new dispensation, commercial banks are facing minimum capital thresholds of N500 billion for international authorisation and N200 billion for national authorisation. In contrast, those with regional authorisation are expected to achieve an N50 billion capital floor.
Similarly, non-interest banks with national and regional authorisations will need to increase their capital to N20 billion and N10 billion, respectively.
To enable the banks to meet the minimum capital requirements, the CBN urged banks to consider injecting fresh equity capital through private placements, rights issues, and/or offers for subscription; Mergers and Acquisitions (M&As); and/or upgrades or downgrade of license authorisation.
There was a significant increase in stock prices of the 10 banks in the 2024 financial year and it contributed to their market value on NGX.
“According to analysts, investors have been trading cautiously in the banking stocks on the backdrop of the recapitalisation policy of the Central Bank of Nigeria.”
In the period under review, the market capitalisation of GTCO added N485.62 billion to close at N1.68trillion as of December 31, 2024, when its stock price gained N16.50 per share or 40.7 per cent to close 2024 at N57.00 per share from N40.50 per share it opened for trading.
GTCO declared N1.22 trillion profit before tax in nine months of 2024, gaining the highest market value in the year under review, followed by Zenith Bank Plc.
Zenith Bank’s market capitalisation closed in 2024 at N1.43 trillion when its stock price closed in 2024 at N45.5 per share, about N6.85per share or 17.7 percent increase from N38.65 per share when the stock closed in 2023.
The United Bank for Africa Plc and FBN Holdings Plc joined the top four financial institutions with a market value above N1 trillion.
As UBA’s stock price appreciated by N8.35 per share or 32.6 per cent to close 2024 at N34 per share, its market capitalisation increased to N1.16 trillion as of December 31, 2024. For FBN Holdings, its market capitalisation closed in 2024 at N1.01 trillion when its stock price increased to N28.05 per share, N4.50 per share, or a 19.11 per cent increase over N23.55 per share it opened for trading last year.
Others are: Access Holdings Plc, N847.75billion; Wema Bank Plc, N195.01billion; Jaiz Bank, N133.77 billion; FCMB Group Plc, N186.15billion; Sterling Holding, N161.23billion; Ecobank, N513.8 billion; and Fidelity Bank, N560.21billion market capitalisation as of December 31, 2024.
Among the investigated banks, Access Holdings and FCMB Group are the only two financial institutions that have completed capital-raising exercises on the Exchange.
Investors await the outcome of Sterling Holdings, GTCO, FBN Holdings, Fidelity Bank, Zenith Bank, and UBA capital raising exercise.
Ongoing banks’ recapitalisation exercise pushed up deals in Nigeria’s equities market by 44 percent in the first seven months of 2024.
The Nigerian Exchange Limited (NGX)’s stock transaction figures showed that deals from January to July 2024 were N941.62 billion higher than those seen in the same period of 2023.
Total equities transactions in seven months to July stood at N3.095 trillion as against N2.154 trillion obtained in seven months to July 2023.
“The first half of 2024 was a whirlwind for the Nigeria Exchange Group (NGX), with macroeconomic shifts and policy changes stirring up the market.
“The banking sector stole the show, grappling with its recapitalisation saga, which drove much of the market’s ups and downs,” said Lagos-based Comercio Partners research analysts.
“There would be more activities in the equity space, as banks given the ongoing recapitalisation would raise more capital to meet the benchmark,” Comercio Partners research further said in their second half (H2) macroeconomic and markets outlook.”
Activity level on the Nigerian bourse peaked since banks intensified their capital raising programmes.
On the sector’s recapitalisation, Investment banker and stockbroker, Tajudeen Olayinka, stated that banks accessing the capital market to raise capital are a welcome development, stressing that the stock market is ready to support banks in their quest to meet CBN requirements.
“The truth is that most banks may not be able to raise as much as they require from the stock market at this time because of high interest rates, among other factors. Ordinarily, banks could have raised as much as they required at a lower cost of equity and as it is now, they may have to consider a higher cost of equity.
“For that reason, some will have to go by the way of right issues and public offers like what Fidelity Bank is doing right now. The exercise will attract foreign investors and local investors are ever ready but may not show much interest due to weaker purchasing power,” Olayinka explained.
