Published financial statements for four of the five Malawi Stock Exchange (MSE)-listed commercial banks have shown that the banking sector maintained its profitability trail in their half-year ended June 30 2021, a performance which poises shareholders to reap benefits on dividends.
The banks include National Bank of Malawi (NBM), which posted a post-tax profit of K12.8 billion, up by 8 percent from K9 billion recorded during the same period last year. The bank has since declared a K5 billion interim dividend.
FDH Bank posted a K4.550 billion profit-after-tax, up from up from K3.223 billion it posted during a similar period last year.
NBS Bank, which for some years has been making losses, recorded a 55 percent increase in its profit-after-tax to K4.3 billion in the period from K2.8 billion last year and declared a K1.7 billion dividend.
Of the five banks, Standard Bank had its profit for the six months period declining by eight percent to K11.5 billion from K12.6 billion last year, but went ahead to declare a K6 billion dividend.
The industry has remained resilient to myriad shocks including the Covid pandemic, which sent other sectors of the economy almost on their knees, thanks to its positioning, diversification of products and technology.
All factors being equal, the overall performance of the listed commercial banks could propel continued rise in share prices on the stock market, according to capital market experts.
In an interview last week, Alliance Stockbrokers Limited Operations Manager Thokozani Saulosi said the industry remained afloat amid the pandemic owing to strategies players adopted.
He said the banks saw both interest and non-interest income growing, which positions them systematically in a market that has been volatile for some years now.
“Positive news from the half year results leads to an increase in demand for the counter in theory. However, there is already demand for shares in some of the well performing counters, especially in the banking sector, and the news will only reaffirm the demand. Therefore, we should expect an increase in share price,” Saulosi said.
He added that investors’ options were influenced by factors such as economic stability.
“The third wave and news of a new variant of Covid are a cause for a gloomy picture. However, the stock market has still been resilient and, now that we know the virus is amongst us, listed companies even the hospitality industry are executing strategies of recovery and growth amidst the pandemic,” he said.
MSE Chief Executive Officer John Kamanga said declaration to pay dividends by the firms remains a good sign to investors as it shows that stocks within the financial services are a good hive to hedge against inflation and other economic volatilities.
He said this will attract more investors, not only into the financial sector, but also into the stock exchange as a whole since telecoms sector companies have also performed well within the period.
“The probability of attracting more investors into these companies is likely to be high which will reflect into high demand for such shares. Based on market forces of high demand compared to supply side of the same, prices are bound to rise but this will be dependent upon the availability of willing sellers of the shares.
“From the historical perspective, in the last quarter of the financial year, the market is usually slow; however, with the anticipated listing of a financial services company during the same period, we expect to experience more trading activity and this may be reflected in companies registering good returns,” Kamanga said.