Indications emerged at the weekend that the Nigerian Exchange (NGX) banking index posted the biggest gain for the week, as it rose 7.0 percent on the back of strong buying interest in Sterling Bank (+10.0 percent), Access (+9.6 percent), and UBA (+7.3 percent).
This is coming as Wema Bank Plc has opened its rights issuance of 8,572,103,573 ordinary shares of N0.50 each.
The Board of Directors of Wema Bank, at its meeting held on August 17, 2023, approved the issuance of 8,572,103,573 ordinary shares of N0.50 each by way of rights, with a conversion of two new ordinary shares for every three ordinary shares held as of the close of business on September 28, 2023, at a price of N4.66 per share.
This issuance has been scheduled to close on Friday, December 29, 2023.
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company at a discount price. This means that investors with shares in Wema Bank before September 28, 2023, are entitled to participate in these rights at the conversion rate of two for three ordinary shares.
Analysts explain for example, that an investor with 1,000 units of Wema Bank as at the qualification date with a two for three conversion rate would be entitled to buy 666 units at N4.66. That is (1000/3) x 2.
It should be noted that as at close of market on Thursday, December 14, the market price of Wema Bank was N5.18, which means that there is a 52kobo premium on the rights price.
Meanwhile, on Thursday, banking stocks, including First City Monument Bank (FCMB), United Bank of Africa (UBA) and Fidelity Bank, contributed significantly to this positive market trend, riding the wave of increased investor interest.
The market breadth leaned towards positivity with 27 gainers outweighing 26 laggards in a day marked by notable fluctuations.
Analysts said as Nigeria rolls out sweeping foreign currency and economic reforms, it’s bringing investors back to the stock market.
The NGX All Share Index is approaching levels last seen in 2008 after President Bola Tinubu’s government scrapped costly fuel subsidies and devalued the naira. Banks have emerged as the biggest winners, with an index of shares soaring 23percent last month, the most since 2018.
Meanwhile, the NGX Banking Index, designed to provide an investable benchmark that captures the performance of the banking sector, has risen by 95.35 percent, according to market data as of the close of trading on Tuesday, December 12,2023.
This index comprises the most capitalised and liquid company house names like Access Corporation, ETI, Fidelity Bank, Jaiz Bank, Sterling Financial Holdings, Unity Bank, Wema Bank, UBA and Zenith Bank.
“In reaction to the announcement of the liberalisation of the foreign exchange market in June, we published our intention to raise our notional exposure to the bank sector.
“We took our exposure up from 16percent at the beginning of June to 33percent by late July.
“Re-running our numbers through our performance attribution model, we calculate that this decision has earned us an incremental 317 basis points (bps),” Coronation Research analysts said in their December 4, note to investors.
All the Nigerian banking stock returns are in green year-to-date (YtD). Market’s price list shows that UBA has risen most this year by +205.3percent, Sterling Financial Holdings (+181.4percent), while Access Corporation is up by 140percent.
ETI has also risen by 115.1percent this year, FBN Holdings (+112.4percent). FCMB Group has risen by 76.6percent, Fidelity Bank (+109.2percent), GTCO (+71.7percent), Jaiz Bank (+63percent), and Stanbic IBTC (+97.3percent).
Others are: Unity (+161.8percent), Wema (+33.1percent), and Zenith Bank (+47.9percent).
“We expect buying interest to persist in the market (particularly the banking sector) driven by an optimistic outlook,” Meristem research analysts said in a recent note.
READ ALSO FROM NIGERIAN TRIBUNE
