Banking Sector Sell-Off Persists as Investors Lose N1.57 Trillion Ahead of CBN Recaps Exercise


Last week witnessed a continued massive sell-off in the banking sector as investors braced themselves for the upcoming recapitalization exercise announced by the Central Bank of Nigeria (CBN), resulting in a staggering loss of N1.57 trillion.

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By the week’s close, the market capitalization plummeted to N56.286 trillion from N57.865 trillion the previous week, marking a significant 2.7 percent Week-on-Week (WoW) decline. Correspondingly, the All Share Index (ASI) dropped by 2.7 percent to 99,529.75 points from 102,314.56 points, primarily driven by profit-taking activities in tier-1 banks’ shares.

The sustained pressure on banking stocks, particularly Guaranty Trust Company (GTCo), Zenith Bank Plc, United Bank for Africa (UBA) Plc, FBN Holdings Plc, and Access Corporation, led to an 11.5 percent decline in the banking index.

Despite the downturn, trading activity levels showed positivity, with a 41.1 percent increase in total trading volume and a 12.8 percent rise in total trading value. Volume traded surged to 1.597 billion from 734.04 million, while the value of shares traded appreciated to N32.313 billion from N21.58 billion in the previous week.

Sectoral analysis revealed that four major sectors recorded price declines, with the banking sector experiencing the most significant loss at 11.5 percent, followed by the insurance (-2.8%), industrial goods (-2.7%), and consumer goods (-1.0%) indices.

In their forecast, analysts at Cordros Capital anticipated a continuation of bearish sentiments, particularly with the possibility of profit-taking following recent announcements such as the suspension of the Dangote Foods merger and reactions to the banking sector’s recapitalization exercise. They also highlighted the potential influence of developments in the macroeconomic landscape and corporate actions on investors’ sentiments in the short to medium term.

Details of the week’s transactions showed that the financial services sector, measured by volume, dominated the activity chart with 1.148 billion shares valued at N22.422 billion traded in 26,192 deals, contributing significantly to the total equity turnover volume and value.

The conglomerates sector followed, with 117.629 million shares worth N1.579 billion in 2,501 deals, while the oil and gas sector closed as the third most traded sector with a turnover of 92.498 million shares worth N810.985 million in 2,621 deals.

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Emman Tochi
Emman Tochi
Emma Tochi is Naija247news Media Northern Bureau Chief, he's based in FCT Abuja. He overseas the northern operations of this business media

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