Rencap: High dividend payment to drive banking stocks trading

Renaissance Capital Africa analysts are anticipating a surge in trading activity on banking stocks this month, driven by higher dividend payments. Olumide Sole, the Head of Financial Institutions Research at Renaissance Capital Africa, shared insights on the recent performance of Fidelity Bank, Axis Bank, and the upcoming Q3 earnings reports. Fidelity Bank reported a remarkable half-year earnings with a 157.8 percent increase in profit after tax, reaching 159.8 billion Naira. The standout highlight for Fidelity Bank was the substantial growth in its core banking income, particularly its net interest income margin. The bank capitalized on the higher interest rate environment to boost its interest income significantly, resulting in a more than 100 percent rise in dividends declared. This impressive performance caused a notable uptick in the stock's market performance. Shifting focus to Axis Bank, significant developments were noted, including a merger with ARM Pensions to form Axis ARM Pensions and receiving approval to establish a banking subsidiary in Namibia. The bank's strategic moves to expand its customer base and geographical footprint led to a substantial increase in assets. Analysts expect Axis Bank to leverage these developments to enhance its performance in the future. Looking ahead to the anticipated Q3 earnings, Olumide highlighted the banking sector and oil and gas firms as key areas of interest. With the Central Bank of Nigeria implementing monetary tightening measures, the performance of banking stocks is under close scrutiny. Additionally, the oil and gas sector, particularly upstream companies like Seplat and Tuta, is expected to benefit from dollar-denominated revenues amidst a favorable dollar performance. On the downside, the consumer goods sector may face challenges due to ongoing economic headwinds. In terms of trading outlook for the week, banking stocks are expected to dominate the market, with Fidelity, UBA, Zenith, and GT Bank likely to attract significant investor interest following substantial increases in dividend payouts. The surge in interim dividends by major banking institutions is poised to drive trading volumes and performance within the banking sector this week. In conclusion, the market is abuzz with anticipation as high dividend payments fuel trading activity on banking stocks, setting the stage for a potentially robust week of trading in the Nigerian stock market.