The five Malawi Stock Exchange (MSE)-listed commercial banks are contributing 70 percent of market capitalisation, a situation that has attracted mixed reactions from experts on the market’s exposure to concentration risk.
The five namely, FDH Bank plc, Standard Bank plc, NBS Bank plc, National Bank of Malawi plc and FMB Capital Holdings through its subsidiary First Capital Bank, have a combined K10.8 trillion market capitalisation out of the K15.4 trillion total market capitalisation, representing 70 percent.
For the past 12 months, the cumulative capitalisation of the banking sector increased by 176 percent from K3.9 trillion, which means that the five banks almost singlehandedly drove the market capitalisaition growth to the current level.
But MSE chief executive officer John Kamanga, in an interview on Friday, downplayed the concentration risk the situation poses on the market, but added that the history of the stock exchange culminated from the privatisation of the State-owned companies, which resulted in more banks being listed.
He said: “The concentration of banks may not necessarily pose a big risk as there are other companies in other sectors which have a large market capitalisation that would absorb investor appetite into the market such as manufacturing and hospitality industry.
“The stock exchange has, however, intensified its efforts to attract more companies from other sectors such as mining.”
Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa said in an interview that the situation is tricky because the stability of banks guarantees market strength and resilience, adding that the market’s over reliance on one sector is risky.
He said: “The dominance of the banking sector on the MSE brings a sense of stability as banks are generally seen as financially strong and well-established.
“However, this heavy reliance on one sector is risky. If something goes wrong in banking, the whole market could be affected. The lack of variety means investors have fewer ways to spread their risk, leaving the market more exposed to problems within the banking industry.”
But stock market investor and former investment banker Benedicto Nkhoma said the risk depends on the performance of the banks, but highlighted that the sector is well capitalisation and having a positive impact.
“The market usually responds to positive market news. So far, banks have been sending positive news for the past few years,” he said.
In a separate interview, financial expert and former bank executive Misheck Esau described the listed banks’ strong performance as critical to the market, but expressed concern that the sector is making the profits mainly from lending to government instead of the real sector.
He said: “These top performers you have, have contributed greatly to wealth creation to their shareholders and I am sure many Malawians have benefited from this.”
Esau said there is need to reverse the trend where most banks’ profits should come from private sector lending and in turn the private sector should invest in productive sectors to enhance economic development and wealth creation.
The five listed banks posted a cumulative profit of K380 billion in 2024.
