Bank stocks Snaps 12-Day Drop

Nigerian bank stocks rose the first day in 12, snapping the longest streak of losses in at least three years on speculation an 18 percent drop in the period was overdone.

The Bloomberg NSE Banking Index, which tracks the performance of the 10 most capitalized banks, rose 1 percent to 301 by 11:49 a.m. in Lagos, rebounding from the weakest close since January 2009.

The gauge’s 14-day relative strength index, which shows how rapidly prices advanced or dropped during a specified time period, was 21 today. A reading of 30 or below signals to some investors that shares are set to increase. The index trades at 10.7 times historical earnings, according to data compiled by Bloomberg. That compares with 13 times reported profit for the MSCI Frontier Markets Index.

“The valuations of the banks were getting too attractive to be ignored, and their fundamentals do not justify such a sell-off,” Adesoji Solanke, a Lagos-based banking analyst with Renaissance Capital, said by phone today. “The sector has been oversold.”

The Central Bank of Nigeria on Aug. 6 nationalized Afribank Plc, Bank PHB Plc and Spring Bank Plc on concern they won’t meet a Sept. 30 recapitalization deadline. Asset Management Corp. of Nigeria, set up by the central bank to buy non-performing loans from the country’s lenders, will inject 679 billion naira ($4.5 billion) into the three banks.

Guaranty Trust Bank Plc, the country’s second-biggest lender by market value, gained for the first time in seven days, adding 2.9 percent to 11.98 naira, while Zenith Bank Plc, the largest lender, rose 2 percent, to 12.56 naira. First Bank of Nigeria Plc, the third-biggest lender, rallied 1 percent to 10.25 naira.

SFGate