NSE slips as bank earnings disappoint

The half-year earnings season in the Nigerian Stock Exchange (NSE) has been a mixed bag so far, with a flurry of results hitting the market in the last 48 hours. Stockbroker and Capital Market Analyst, Rotimi Fakayejo, joined CNBC Africa to discuss the current state of the market and share insights on what investors can expect moving forward. While some companies like Seplat reported positive numbers, others such as First Bank and Union Bank disappointed, leading to a lackluster performance in the market. Despite the mixed results, Fakayejo remains hopeful for positive traction in the market as more earnings reports are anticipated in the coming weeks. The disappointing numbers from First Bank Holdings (FBN) have had a notable impact on the market. Although there was a reduction in the MPL, it did not translate into concrete positive signals for profit after tax and dividends, which also saw a decline. This downward trend has affected not only the banking sector index but also the general market indices, with the OSHA index dropping by 0.46%. While other banks like GT Bank, Zenith Bank, Access Bank, and UBA are yet to release their audited half-year reports, expectations are high for better results compared to First Bank. Fakayejo believes that these upcoming reports could potentially inject some positive momentum into the market. Seplat, on the other hand, stands out as a bright spot in the current earnings season with over 100% improvements in their financials. Despite the positive reports, the impact on the market has not been significant yet. Fakayejo believes that once investors fully digest the results, there is a high likelihood of a more favorable pricing of the stock, which could potentially boost market sentiment. Looking ahead, Fakayejo recommends focusing on key banking stocks like GT Bank, Zenith Bank, UBA, and Access Bank, which he considers undervalued at the moment. He anticipates that these stocks could be good picks for investors, especially with the potential for interim dividends from some of the banks. Fakayejo also highlights Access Bank, particularly after its merger with Diamond Bank, as a stock to watch closely for potential upside surprises in earnings. Discussing the broader macroeconomic landscape, Fakayejo sees room for optimism in the second half of the year. With the recent confirmation of ministers in the federal government and the expected assignment of portfolios, he believes that increased government spending and economic activities could stimulate growth. Fakayejo is hopeful that these developments will lead to better GDP numbers and overall economic advancement in Nigeria. As the earnings season unfolds and economic indicators shape market sentiment, investors will closely monitor upcoming reports and macroeconomic factors to make informed investment decisions. While the current market trends reflect a sense of uncertainty, the potential for positive growth and improved performance remains on the horizon.