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The stellar performance of banks should fizzle in 2024 which could see investors dump stocks as industry profit is expected to dip by 54 percent, according to a latest report by Cordros Securities Limited.
Banks have been major drivers of the NGX-30 (the most liquid and capitalised firms) profit and their shares have been rallying as foreign exchange gains and a higher yield environment helped prop up profit.
“Contrary to the significant expansion in profit in 2023FY, we expect deposit money banks’ (DMBs’) bottom-line to come under pressure in 2024 as earnings will normalise across players. Nonetheless, we believe that major income lines, particularly the core income line, will remain resilient,’’ said analysts at Cordros Securities.
“Our reasoning for stronger core income growth is that we expect the interest rate environment to remain elevated, which will translate to higher net interest margins (NIMs). However, we expect banks to cautiously grow their loan books on the back of the weak macro environment, and expected tighter system liquidity,’’ said the analysts.
Analysts have unanimously agreed that the economic dynamics of next year will not trigger another round of devaluation gain as the Naira is expected to gradually stabilise while inflation cools.
Data gathered by MoneyCentral shows that the combined net income or profit after tax (PAT) of listed banks surged by 151.15 percent to N1.97 trillion in September 2023, from N785.15 billion as at September 2022.
The bulk of earnings growth is largely driven by weakness in the currency, which is not sustainable in the first quarter of 2024, according to Tajudeen Ibrahim, head of search and strategy at Chapel Hill Denham Limited.
“There will be a bit of slowdown in profit as lenders will focus more on their core business which is lending,” said Ibrahim.
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