A capital market expert, Ambrose Omordion, has said the financial services sector, particularly the banking sector, remains the most relevant on the Nigerian Exchange Limited (NGX), even as he calls on the Central Bank of Nigeria to allow banks to pay dividends for 2023. Omordion was the guest analyst on a capital market-focused TV programme recently.
He said based on the unaudited 2023 financial year results, banking stocks continue to be among some of the best performers based on sound fundamentals. He said outside of the FUGAZ, he was impressed with Fidelity, Wema, Jaiz, and Sterling Banks’ results and that they are promising stocks.
The CBN had advised commercial banks not to pay dividends for the 2023 financial year as it plans a recapitalisation exercise for the banking sector. But Omordion said not paying dividends will send the wrong signal to the investing public and may work against the planned recapitalisation exercise since it is the same investors and shareholders the banks will turn to for fresh capital injection. According to him, most of the banks are solid enough to pay dividends. For instance, Fidelity has for 15 years paid dividends to its shareholders and its declared FY 2023 results can support dividend payment.
“At the end of the day, if you really want these banks to recapitalise you need to let them reward their shareholders. If you prevent them from paying dividends you will send the wrong signals to investors. Most of them are solid to pay because outside of their FX gains, their interest income and earnings from trading activities are impressive,” says Omordion.
According to the analyst, the banking sector may not be in the trillionaire club yet (quoted stocks with very high capitalisation and or earnings) but in terms of liquidity, volume of trade, active trading, and consistent payment of dividends over the years, banking stocks remain the best on the exchange and a must-have in any portfolio.
“These days because of the new listings of big tech and energy companies, we are seeing some changes in the market but still the banking sector remains the most active in the market in terms of liquidity, volume and consistent payment of dividends,” says Omordion.
The analyst wondered why the CBN has yet to approve the release of the FY 2023 results the banks submitted to it for vetting. He, therefore, called on the apex bank to expedite action on the results as well as allow the banks to pay dividends. He said that dividend payment is what will encourage investors to buy into the proposed recapitalisation exercise.
“Most of the results have been delayed by CBN. Investors wonder why. Is it that the CBN is still screening, examining, or querying the numbers? At the end of the day, if you really want these banks to recapitalise you need to let them reward their shareholders.”
