Banking stocks led a recovery on the Nigerian Exchange (NGX) as the index rose by 3.16%, reversing a six-day market downturn. Driven by strong third-quarter earnings reports and a slight cooling in fixed-income yields, investors showed renewed interest in top-tier banking stocks.
United Bank for Africa (UBA), Zenith Bank, Access Holdings, Fidelity Bank, and FBN Holdings were among the key performers that lifted the NGX banking index, with the surge starting early in the trading session. Analysts point to healthy earnings growth and optimism around the banking sector’s profitability as primary factors attracting investor interest.
UBA shares jumped 9.87%, Zenith Bank climbed 5.78%, and Access Holdings rose by 4.89%, driving the market valuation of Nigeria’s top lenders to nearly ₦5 trillion. Tier-2 banks also showed gains, while a marginal increase in insurance stocks contributed to the positive momentum.
“The third-quarter results from the major banks have exceeded expectations, which is reassuring for investors amid economic uncertainty,” said a stockbroker at Afrinvest. “With net interest income on the rise, banking stocks are becoming a popular choice for long-term investment.”
The trading session saw robust activity, with deal volume increasing by 2.82%, trading volume up by 194.37%, and transaction value surging by 79.64%. Over 3.6 billion shares were exchanged across 10,679 deals, totaling ₦25.57 billion in traded value.
Bank Profits Strengthened by High-Interest Rates
The Nigerian banking sector has benefited significantly from the Central Bank of Nigeria’s (CBN) recent rate hikes, aimed at tackling inflation and stabilizing the naira. Since the beginning of the year, the CBN has increased its policy rate from 18.75% to 27.25% across five meetings, creating favourable conditions for banks’ net interest income.
Daba Finance, a financial consultancy, highlighted that the high-interest environment is a key driver of the recent banking stock rally, as banks see improved returns on fixed-income investments. The firm projects further gains in bank stocks, forecasting an 11% increase in Guaranty Trust Holding shares and a potential 42% rise for Zenith Bank by the end of the year.
Market analysts are also looking ahead to the CBN’s upcoming monetary policy meeting on November 26, where another rate hike is anticipated amid rising inflation, which hit 32.7% in September. Additional rate increases could further boost net interest income in the banking sector, solidifying its position as a stronghold in Nigeria’s high-interest-rate environment.
As the NGX banking index continues its upward trajectory, investor sentiment remains positive, with analysts suggesting that banking stocks will remain a focal point for those seeking resilient investment opportunities amid economic challenges.
