Why you should invest in Bank Shares

Why you should invest in Bank Shares in Nigeria.

With a good number of banks making announcements of their offerings to the public about investing in their shares, it’s only fair we talk about why you should invest in bank shares.

As part of the recent bank recapitalization policy initiated by the Central Bank of Nigeria (CBN), several banks have moved swiftly to raise additional capital to meet the new regulatory requirements.

This policy mandated banks to increase their minimum capital base.

A bank share is a unit of ownership in a bank, giving the shareholder a stake in the bank’s profits and assets.

When you purchase a bank share, you become a shareholder, which means you own a small part of the bank. As a shareholder, you may receive dividends.

A dividend is a portion of the bank’s profits distributed to shareholders. You also stand to benefit from capital gains if the value of the share itself increases over as time goes on.

 

Before you invest in Bank Shares, consider the following.

Financial Health:  do your research on bank before investing. The same way you carry out investigation before investing in companies is the way you should also look at the bank’s financial statements. Don’t assume that because it’s a financial institution, they will always perform well.

Dividend History: Check the bank’s history of paying dividends. Consistent dividend payments can tell you a stable and profitable bank.

Regulatory Compliance: Another thing you must do is ensure the said bank complies with regulatory requirements set by the Central Bank of Nigeria (CBN) and other relevant authorities. Adherence to these regulations is crucial for their stability in the long run.

Management Quality: The bank’s leadership team plays a critical role in its success. Research the background and track record of the bank’s executives. Leadership changes, such as the recent CEO appointments at some banks, can impact investor confidence.

 

How Do You Buy Nigerian Bank Shares?

Firstly, make your research on the banks you are considering, their financial strength etc.

Secondly, go ahead to buy the shares once you have decided on the bank and the number of shares you want to acquire. place an order through  your brokerage account.

In Nigeria, platforms like Meristem, CardinalStone, and Stanbic IBTC provide brokerage services. Some fintech apps make this easier for you, too.

You can choose between a market order (buy at the current price) or a limit order (buy at a specific price).

Thirdly, after purchasing the shares, keep an eye on your investment. Stay informed about the bank’s performance and any industry developments as regulatory changes and economic policies can impact share prices.

 

How valuable are bank Shares.

Bank shares work the same as company shares. This means the value of bank shares can fluctuate based on several factors, including the bank’s performance, economic conditions, and so on. Consider only stable options, especially those of well-established banks with strong financials.