FX scarcity, Holdco structure adoption drag tier 1 banks’ shares down

The scarcity of foreign exchange in Nigeria and the adoption of holding company structure by some listed lenders have been attributed to the underperformance of the stocks of tier one banks.

Of the six tier one banks’ stocks, only two of them recorded growth in the last one year, the majority of them have declined in double digits.

Ecobank Transnational Incorporated (ETI) topped the outliers, having grown 108.33% in the last one year to N11.25 on September 30, while FBN Holdings, the second share that defiled the downtrend among the tier one lenders, rose by 26.71% during this period to N10.20.

Among the tier one lenders, GTCO shares suffered the most decline in the last one year, dropping by 36.72% to N17.75 per share at the close of business on September 30.

Access Holdings and Zenith Bank during the period under review also shed 21.46% and 14.71% to N8.05 and N20.00 respectively.

UBA was the only tier one bank that dropped by a single digit of 7.28% in the last one year to close at N7.00 at the end of the third quarter.

Rotimi Fakayejo, CEO, Enterprise Stockbrokers, attributed the downtrend in some of the tier one banks’ stocks to the negative reactions of investors to their decision to adopt a holding company structure that would prevent pension fund administrators from investing in them, made many portfolio investors divest from the banks.

He explained that the change in the majority shareholder in FBN Holdings was responsible for the upward movement in its share price and investors’ expectation that ETI was going to turn the corner after the trend of underperformance, spurred the surge in its stock price.

“When Femi Otedola took a position in FBN Holdings, he mobbed up the excess availability of the stock in the market. That is why it was able to maintain a positive compared to others,” he told Businesslive.ng.

GTBank and Access Holdings were two of the three listed Nigerian lenders that recently transformed into holding companies.

Nigeria has been struggling with scarcity of forex despite crude which is the country’s primary source of the dollar rising above $100 per barrel.

Oil theft has made the country unable to meet its OPEC quota of 1.83 barrels per day, as it plummeted to 972,394 bpd in August from 1,083,899 bpd in the previous month.

Consequently, Nigeria’s external reserves have dipped 5.51% this year and 1.87% to $38.02 as of September 29, 2022, which is the lowest in one year.

Foreign portfolio investors have been struggling to repatriate their funds, as capital importation in the country decreased by 2.4% to $1.53 billion, reflecting foreign investors’ apartheid of the Nigerian economy.

Meanwhile, Mrs Hadassah Isaac of TRW Stockbrokers, told Businesslive.ng that the economic downturn in the country has been having an adverse impact on the banking stocks and the entire entity market.

“Generally, people do not have money.  One of the things that drive the capital market is the availability of liquidity,” she asserted.

The country’s inflation rate has been spiralling this year, standing at 20.52%, 17 years high.

This has forced the Central Bank of Nigeria (CBN) to hike benchmark interest thrice this year alone, the last being on September 27, when in it adjusted it upward by 1.5% to 15.5% to tame the accelerating inflation.

Although the Nigerian equity market has recorded a 14.8% return this year, it had a 1.6% dip to 49,836.21 points in September.