Banks stellar performance not reflected at stock market

ABDUEL ELINAZA

SHARES for banks at the Dar es Salaam Stock Exchange (DSE), have been trading at bearish mode since January despite good performance demonstrated by banks.

The share prices are driven by the banks good 2015 performance where almost all banks grew up in accordance with the money supply growth.

According to Bank of Tanzania (BoT), the money supply (M3) for the year ending January 2016, grew by 14.9 per cent compared with 13.9 per cent in January 2015 driven to a large extent by increase in private sector credit and net foreign assets of the banking system.

Dhow Financials CEO, Prof Mohammed Warsame said usually the banking sector grows in line with money supply, because banks are driven by deposits. “Probably when the figures are out (of Money Supply) you will find out it was around 15 to 16 per cent.

Therefore most banks grew around those numbers,” Prof Warsame said. However, despite the average performance the banks share prices have dipped down between 3.0 per cent and 18 per cent up to last Wednesday.

The National Microfinance Bank (NMB), leads the pack after its share slid 18 per cent to 2,050/-, followed by DCB Bank 12.28 per cent, CRDB bank 5.0 per cent to 375/- and Mwalimu bank 3.01 per cent to 645/- , according to Tanzania Securities.

Other banks; Yetu Microfinance, Mkombozi, and Maendeleo saw their shares stagnated trading at 600/-, 1,000/- and 600/- respectively. Analysts have it that the operating environment during this year’s first quarter (Q1), was challenging and uncertain not only to DSE but also in other stock markets in the continent and beyond.

“Slowdown in economic growth rates, volatile exchange and interest rates, the slowdown in China (and its impact in African commodity prices) and the increased social discontent being some of the factors that concern investors,” DSE CEO, Moremi Marwa said in CEO Quarterly note.

He said for DSE Q1 had mixed results—the liquidity and domestic listed stocks performance activities recorded decreased activity while total market capitalisation and the DSE Index (tracking all 23 listed equity companies) increased.

For the banks, which their survival depends on liquidity stance, saw their deposits grew roughly between 10 per cent and 18 per cent. Prof Warsame attributed the deposits growth to money supply scarcity which was below average last year because of challenges of the 2015 general election. On share price fall, Prof Warsame said You see share prices are driven by liquidity.

Investors who are coming to buy have to be liquid. “When you don’t find liquid, what happen is that small-small shareholders who may not concern with fundamentals, may actually be driving the prices down”.

The financial analyst professor seconded Mr Marwa saying that most banks stocks worldwide had gone down, even in Kenya and even in other countries. The reason behind was because of international investors who experienced the US interest rate going up, US dollar exchange rate going up sold their stocks to invest in US.

“China was having challenges with its stock. So when those major stock exchanges in the world are going down you realise things are serious,” Prof Warsame said. However, he said, the fundamental have since improved but the stock prices lagged behind.

These kinds of situation got corrected overtime. “When investors see fundamental are strong it’s when you get a big share price increase,” Prof Warsame said. However, despite share prices trading south, the trailing weighted average dividend yield was 4.2 per cent compared to 3.0 per cent in the previous quarter.

DSE’s weighted average market Price Earnings (PE), ratio for domestic listed companies was trailing at 16.10 times as of end March compared to16.11 times during the end of last quarter.