The reforms in the banking sector have contributed towards the rise in prices of bank stocks on the Nigerian Stock Exchange, analysts have said.
This view was given by analysts from Partnership Investment Company in their report made available to our correspondent on Wednesday.
In the past one week, the NSE Banking Index which measures the performance of the top 10 stocks in the banking sector, increased by 6.7 per cent or 19.63 basis points to 313.39 points on Wednesday, up from 294.34 basis points recorded a week ago.
The NSE’s All-Share Index gained 4.2 per cent or 875.70 basis points from 21,094.51points last Wednesday, to 21,970.21 points, while the market capitalisation of the listed equities was also up by 4.2 per cent or N280bn to N7.007tn on Wednesday, up from N6.727tn recorded a week earlier.According to the analysts, there has been improved performance in the stocks in the banking sub-sector and this has can be attributed to the reforms of the sector by the Central Bank of Nigeria.
They noted that the policies, which the CBN had been coming up with overtime, had gone a long way towards making the sector even more attractive to investors.
The report noted that the recent regulatory intervention and cash injection in some banks had brought about better transparency and stronger risk management framework in the banks, translating to improved performance in the results.
It said, “The Nigerian banking sector regulation is now more in line with global best practice, with several rules and policies that are churned out on a regular basis by the regulator, this is however, expected, giving the experience of the recent past.With a combined value of over $40bn in 2008, the market value of the banks has shrunk to about $13.3bn following the capital market exit frenzy that followed the market rally up until March 2008.
“The regulatory intervention and cash injection has brought about better transparency and stronger risk management framework; and the results of many banks for the financial year ended December 31, 2011 attest to the efficacy of the several efforts to reform the sector.
The analysts also added that the cash-less policy would go a long way towards boosting the formal sector.
“The introduction of the cash-less policy is expected to reduce transaction cost and bring more funds outside the banking system into the formal sector,” the report said.
The report further stated that the challenge for the sector remained inconsistent government policies which tended to discourage long-term business plans.