Banks’ financial statements propel BI index up

DAR ES SALAAM: BANKS’ exceptional performance in the second quarter has significantly bolstered banking stocks, reflecting a positive shift in the financial sector.

Recent financial statements from major banks showed robust earnings and operational efficiency, which have invigorated investor confidence as per Dar es Salaam Stock Exchange (DSE) index.

Zan Securities CEO Raphael Masumbuko said yesterday the strong performance has led to a notable 3.498 per cent week-on-week increase in the Banking, Finance and Investment index (BI), highlighting the sector’s growing resilience and appeal.

“The second-quarter releases have provided tail wind to banking stocks,” Mr Masumbuko said through the firm weekly market wrap up adding: “This rise was driven by the appreciation in prices of banking and investment stocks.”

The CEO said such stocks with price appreciation on a weekly basis were CRDB (+9.68 per cent), DCB (+9.09 per cent) and NICO (+1.28 per cent).

Overall, domestic stocks, as measured by the TSI index, have delivered an 8.07 per cent return year-to-date.

“The outlook for equities appears positive, especially as investors are likely to shift their focus from bonds to stocks with strong fundamentals,” the CEO said.

Zan attributed the reallocation to be driven by rising bond yields, which “make equities more attractive in comparison.

“As liquidity tightens in the money markets and yields rise, equities may benefit from increased inflows, particularly in sectors showing robust performance”.

Analysts attribute this uptick for banks to several factors, including improved loan growth, effective cost management and enhanced revenue streams.

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The positive financial results have underscored the banks’ ability to navigate economic challenges effectively, leading to a favourable market response.

“This trend suggests that the financial sector is well-positioned for continued growth, bolstering investor optimism and contributing to broader market stability,” said Leonard Mwanga, an economist.

Looking ahead, the sustained performance of banks will be crucial in shaping the future trajectory of the BI index.

Additionally, this reduced demand could lead to further pressure on bond prices, potentially driving yields even higher.

During the trading week ending last Friday, DSE saw an increase in turnover compared to the prior week.

The total market turnover increased to 2.926bn/, reflecting a 326 per cent uptick from the previous week’s 685.79m/-.

Throughout the week, DCB dominated trading activities, representing 34.73 per cent of the total market turnover, followed by CRDB at 25.94 per cent and NMB at 21.73 per cent.

The net foreign outflow from the DSE since the beginning of the year stands at 26.82bn/- (9.58 million US dollars).

Both major indices were in the red during the week under review, where the All-Share Index (DSEI) and the Tanzania Share Index (TSI) dropped by 1.01 per cent and 0.62 per cent respectively.

The drop on the TSI reflects a drop of prices on CRDB and NMB counters as they collectively present represent 36 per cent of the domestic market capitalisation.

Alpha Capital’s Head of Research and Financial Analytics Mr Imani Muhingo said the decline of two largest banks stocks was likely due to a lack of corporate developments.

“The drop of CRDB and NMB is likely out of lack of corporate events since the end of July when banks published financial results,” Mr Muhingo said.

On the other hand, foreign investors accounted for 7.56 per cent of total equity purchases during the week that ended on 13th September 2024 and 2.86 per cent of equity sales.