The NGX Banking Index has experienced a strong recovery, rising over 20% after reaching a low of 774.35 points in April 2024. This resurgence, driven by notable gains in August and September, comes after a sharp sell-off earlier in the year due to regulatory changes introduced by the Central Bank of Nigeria (CBN).
On March 28, 2024, the CBN announced a new recapitalization policy for commercial, merchant, and non-interest banks, scheduled to take effect on April 1, 2026. The announcement led to significant uncertainty in the banking sector, triggering a wave of selling in banking stocks, particularly among the FUGAZ group—comprising First Bank, UBA, GTCO, Access Holdings, and Zenith Bank. This sell-off resulted in a 24% drop in the NGX Banking Index during April alone.
Recovery in Banking Stocks
Despite the initial downturn, the index has since rebounded, with FUGAZ banks showing significant recoveries in their stock prices, especially during the months of August and September. Analysts attribute this recovery to stronger market activity and positive corporate financial disclosures that boosted investor confidence.
FUGAZ Stock Performance
– **First Bank Holdings (FBNH):**
After plunging by 32% in April, FBNH shares dropped from N35 to N23. However, by September, the stock had regained 28%, closing at N27 with 600 million shares traded, reflecting renewed investor interest.
United Bank for Africa (UBA):
UBA’s stock fell by 14% after the recapitalization announcement, sliding from N28 to N23, and eventually hitting a low of N20.30 in July. By September, it had rebounded by 22%, with market volume reaching 585 million shares.
GTCO:
GTCO saw the steepest decline among the FUGAZ banks, with a 37% drop from N52 to N32 per share. Since then, the stock has staged a strong comeback, appreciating by more than 40%.
Access Holdings:
Access Holdings’ stock price dropped 32% in April, from N24 to N16. By September, the bank’s shares had recovered by 21%, closing at N20.60.
Zenith Bank:**
Zenith Bank’s stock fell by 28% during the sector-wide decline in April, but the stock has since gained over 17%, with a particularly strong 15% increase in September alone.
Positive Market Outlook
Investment analysts, including Mercy Okon from Parthian Associates, have attributed the recovery to favorable financial results from the banks in August and September. These results have improved investor confidence and lifted market sentiment within the sector. Okon believes this positive trend is likely to continue into October, driven by further strong corporate disclosures.
The banking sector’s resurgence highlights its resilience and the potential for continued growth despite earlier challenges posed by regulatory changes. Investors are expected to remain optimistic as market conditions continue to improve.
