Selective buying lifts banking stocks despite lagging market in 2025

Nigeria’s banking equities recorded a mixed but broadly positive performance in 2025, with the NGX Banking Index rising by 39.77 per cent, according to year-end data from the Nigerian Exchange (NGX).

However, the sector lagged the broader market, as the NGX All-Share Index (ASI) gained 51.19 per cent over the same period.

Market analysts say the divergence reflects a shift toward selective investing, with investors favouring banks that demonstrated earnings resilience, strong balance sheets, and clear strategic direction, rather than taking broad exposure to the sector.

Out of the 12 listed banking stocks, only five outperformed the overall market benchmark, underscoring uneven performance across the sector.

While some lenders delivered triple- and high double-digit returns, others struggled amid concerns over integration risks, capital adequacy, and earnings pressure.

“The banking sector recovered in 2025, but it was not a blanket rally,” said Kunle Adeyemi, equity analyst at Lagos-based BroadStreet Securities. “Investors were highly discriminating, rewarding banks with strong fundamentals and punishing those with execution or balance-sheet concerns.”

Wema Bank Plc emerged as the standout performer, returning 124.18 per cent after its share price climbed from N9.10 to N20.40 by year-end. Analysts attribute the surge to optimism around the bank’s digital-first strategy, expanding retail footprint, and improving profitability metrics. July marked the peak of investor enthusiasm, with a 47.16 per cent monthly rally.

Other strong performers included Stanbic IBTC Holdings Plc, which rose 73.61 per cent to close at N100.00, supported by diversified earnings across banking, asset management, and pensions, as well as strong dividend appeal.

First HoldCo Plc followed with a 70.77 per cent gain, driven largely by renewed confidence in its restructuring efforts and capital position. A 54.27 per cent rally in December accounted for a significant portion of its annual performance.

Among tier-one lenders, Guaranty Trust Holding Company (GTCO) advanced 59.12 per cent, reflecting investor preference for well-capitalised banks with predictable cash flows. Zenith Bank Plc also delivered a solid 35.82 per cent return, reinforcing its reputation for earnings consistency and strong liquidity.

“Tier-one banks regained favour in the second half of the year as investors looked for safety, dividends, and earnings visibility,” said Adaeze Okonkwo, portfolio manager at AlphaTrust Asset Management.

Ecobank Transnational Incorporated posted a 49.64 per cent gain, supported by its diversified pan-African revenue base and improvements in operational efficiency. Jaiz Bank Plc rose 51.67 per cent, buoyed by growing acceptance of its non-interest banking model and speculative momentum in the second half of the year.

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United Bank for Africa (UBA), which rose 22.50 per cent, supported by confidence in its pan-African footprint and digital strategy. July delivered UBA’s strongest rally, with a 96.33 per cent single-month gain, the highest among banks in 2025.

Not all banks shared in the rally. Fidelity Bank Plc recorded a modest 8.57 per cent gain, while Access Holdings Plc closed the year with an 11.95 per cent decline. Analysts cited concerns around integration risks, rising capital requirements, and pressure on earnings as factors weighing on investor sentiment.

“Access and Fidelity were not fundamentally weak, but investors remain cautious about near-term execution risks,” said Adeyemi. “In 2025, caution mattered as much as growth.”

Market watchers say the 39.77 per cent gain in the Banking Index signals a clear recovery in banking equities, even though it trailed the broader market. The performance highlights a return of confidence, but one that remains measured and selective.

Banking stocks continue to dominate trading activity on the NGX due to their dividend appeal and systemic importance, with tier-one lenders attracting long-term investors and mid-tier banks benefiting from re-rating opportunities linked to digital and retail growth.

Looking ahead to 2026, analysts say performance will hinge on interest rate trends, foreign exchange stability, regulatory reforms, and banks’ ability to sustain earnings momentum in a still-challenging macroeconomic environment.

“Confidence is back, but it is cautious,” Okonkwo said. “In 2026, fundamentals—not sentiment—will again determine which banking stocks win investor favour.”