Wema Bank leads as top performing banking stocks in Q1 2024

Wema Bank leads as top performing banking stocks in Q1 2024

Wema Bank emerged as the top profitable companies in Nigeria in 2023, largely propelled by a substantial increase in foreign exchange gains during that period.

This robust growth trajectory was also mirrored in their market performance. In 2023, the total market capitalization experienced significant ascent, soaring by about 109% from N3.34 trillion in 2022 to N6.98 trillion in 2023.

This upward trajectory continued into Q1 2024, with market capitalization further climbing to N8.052 trillion, reflecting a 15.37% growth in Q1 alone.

Despite this positive momentum, the NGX Banking Index recorded a growth of 19.17%, which, while significant, trailed the broader market’s performance reflected in the NGX All-Share Index (NGXASI) growth of 39.84%.

This suggests that while investors may have shown confidence in banking stocks, other sectors or stocks within the market as well contributed to the market’s overall growth.

Consequently, Nairametrics has been monitoring the performance of some of the top-performing banking stocks on the NGX this year. Wema Bank, FBNH, GTCO, Unity Bank and Sterling Bank emerged as the five top performers.

Recommended reading: Wema Bank reports 193% PBT growth, proposes N0.50 dividend

Sterling Bank +25.87% YtD
Sterling HoldCo, saw a 25.87% share price appreciation, closing Q1 at N5.40 and market capitalization of N155.468 billion, ranking the bank the fifth-best performing bank among the banking stocks.

Furthermore, the share price performance was outstanding in 2023, achieving a robust gain of 206%, ranking it the second-best performer.

The Group’s strong financial performance in 2023 likely had a considerable impact on its share price performance.

Based on its unaudited interim results, the Group disclosed a net income of N21.52 billion, reflecting an impressive YoY growth of 11.50%.

Looking ahead, the Group anticipates further growth, aiming to achieve a net income of N10 billion in Q2 2024. This projection represents about 47% of the net income generated in 2023.

Investors may interpret this forecast as a sign of management’s confidence in the company’s ability to sustain its growth trajectory, which could positively impact the share price.

Also, its low price-to-sales ratio of 0.63x, which suggests undervaluation may lead to positive impacts on the share price, including potential for appreciation, attracting value investors, market correction, and increased investor interest.

Unity Bank +27.78% YtD
UNITYBNK emerged as the third-best performing stock among NGX banking stocks in 2023, posting a significant YtD gain of 194.55%.

In Q1 2024, it continued its strong performance, achieving a gain of 27.78%, placing it fourth behind GTCO, FBNH, and Wema Bank.

The sustainability of this growth going forward would depend on various factors including the company’s financial health, market conditions, regulatory environment, and management’s strategies.

According to the bank’s 9-month 2023 results, it appears to be facing challenges as it reported a substantial loss after tax of N49.277 billion, indicating a significant 2,461% year-on-year decline.

Looking ahead, the bank’s earnings forecast indicates an anticipated reduction in its losses for both Q1 and Q2 of 2024. The bank projects losses of N8.49 billion for Q1 and N21.58 billion for Q2.

The anticipated effect of these results and forecasts on the bank’s share price in the future may predominantly be negative.

However, the projected decrease in losses could provide a ray of hope for investors. Since the end of Q1, the stock has recorded a modest gain of 1.49%, bringing the YtD gain to 29.63%.

GTCO +29.63% YtD
Closing Q1 2024 with a share price of N52.50 and a market capitalization of N1.545 trillion, Guaranty Trust Holdings recorded a Q1 2024 gain of 29.63%.

This gain accounts for about 39% of the total share price gain in 2023, ranking the bank third-best performer in Q1.

The share price rally of GTCO could be attributed to the strong financial performance of the group. In the first nine months of 2023, GTCO reported a net income of N367.417 billion, indicating an impressive YoY growth of 182% compared to the same period in 2022.

Analysts are anticipating earnings per share to reach N14.39 for the 2023 fiscal year. If this projection is met, it has the potential to influence investor sentiment positively and consequently contribute to a rise in the share price.

FBNH +50.96% YtD
FBN Holdings secured the second-best performing NGX banking stock in Q1 2024. Its share price surged by 50.96%, which is about 44% of its overall gain for the full year 2023.

Its market capitalization soared to N1.276 trillion, positioning it as the third company in terms of market capitalization, and following Zenith Bank and GTCO, as stocks worth over one trillion Naira.

The robust market performance in Q1 could be attributed to the group’s impressive financial results in 2023. The net income grew by 127% YoY, reaching N309.888 billion, while earnings per share surged to N8.56 from N3.75 in 2022.

Furthermore, with the anticipation of earnings per share reaching N5.95 in 2024 and considering its trading liquidity, it is expected to have a notable impact on the share price.

FBNH currently ranks as the 6th most traded stock over the past three months, with a total volume of 1.77 billion shares traded and an average monthly volume of 20.974 million.

However, investors should exercise caution due to FBNH’s recent poor performance, witnessing a decline of 14% in value after Q1.

Wema Bank+51.79% YtD
Wema Bank outshone its peers on the NGX in Q1 2024, with a 51.79% share price appreciation, closing the quarter at N8.50 with a market cap of N109.294 billion.

This impressive performance could be attributed to Wema Bank’s robust performance for the 2023 fiscal year.

The audited financial statements for 2023 reveal a profit after tax of N35.989 billion, representing an impressive YoY growth of 217%.

However, considering the new CBN capital base requirement, Wema Bank faces a significant challenge in meeting the new mandated capital base of N200 billion.

Presently, its share capital and share premium account combine to N15.127 billion, highlighting the substantial gap that needs to be bridged to comply with the new regulations.

The stock probably, in reaction to the news has declined by 3.5% taking the YtD gain down to 46.43%.

Recommended reading: Wema Bank reports 104.7% profit growth in 2023