- Zenith, Access, UBA, Standard IBTC in the lead
- FG should address economic pressure points – Analysts
Despite tough economic conditions in Nigeria currently, four Deposit Money Banks in the Tier-1 category have recorded N2.2 trillion increase in total assets in one year.
The banks recorded a total of N17.443 trillion in the 2018 financial year, up from N15.153 trillion in the preceding year, according to the Central Bank of Nigeria’s statistics.
In the last two years, most banks have been particularly bogged down by insolvency threats, owing to accumulation of non-performing loans and other economic indices, in the downward trend.
A detailed analysis of the banks’ statements of account showed that Zenith Bank Plc increased its total assets by 6.44 per cent to N5.955 trillion, from N5.595trillion in the period under review. Access Bank Plc followed with a 20 per cent increase to N4.954trillion, up from the N4.102 trillion recorded in the comparative period of 2018.
UBA similarly boosted its total assets, with a 19.67 per cent increase, to N4.869 trillion in 2018, up from the N4.069 trillion reported in the review period; while Stanbic IBTC increased its total assets to N1.663 trillion, from N1.386 trillion in the 2017 financial year.
Commenting on the results, capital market observers and analysts said, given the challenges of the operating environment, especially the uncertainties in the year, “the performance is commendable”.
National Chairman, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said the banks had performed well.
“Despite the challenging economy, killings here and there, the banks were able to churn out resilient results through the dint of hard work and focus. That means if the economy was doing well, the financial institutions would have released a far better result and return on investment to their shareholders,” Okezie summed.
In his appraisal, the Managing Director and Chief Executive Officer, APT Securities, Mallam Garba Kurfi, said investors should be advised to look out for those companies that had not declared their results for investment.
He said, “Most of the companies have their year-end in December and most of them release their results around March, April and May. So, investors should take advantage of the earning season so that whatever the companies declare as dividend, they will benefit from it.
“I would advise them to look out for the banking sector, especially the ones that have just declared their results. They should look at the others that are yet to release their results; they are all in price earnings’ ratio that is below five.”
Head, Research and Strategy, FSDH Merchant Bank Limited, Mr. Ayodele Akinwunmi, also said there were pressure points in the economy that the Federal Government must quickly address, in order to stimulate broad-based and inclusive growth.
According to the Lagos-based financial institution, the Nigerian economy has not been expanding enough to lift its citizens out of poverty.
Owing to this, it stressed, there was the need for the economy to expand faster than it was doing at the moment.
Some of the economic pressure points, FSDH’s Akinwumi further listed, were weak infrastructure development in the economy that might not support the growth ambition of the Federal Government; economic depression in the real estate sector; fragile foreign exchange market, and weak revenue generation, which has led to large fiscal deficits.
“Overall, despite the headwinds and the fact that 2018 presented a tough operating environment for the industry, we remain optimistic on the fundamentals underpinning our long-term retail-led business strategy,” the financial expert told our correspondent.
A renowned stockbroker, Mr. Deji Owolabi, said foreign exchange speculators, who had converted their naira to the dollar, were now re-converting the greenback to naira in order to invest in fixed income securities.
He said those that doubted the ability of the CBN to sustain its intervention were now convinced that the banking sector’s regulator had enough ammunition to sustain its foray in the market.
“People have been observing the development in the FOREX market. We have observed, for over four months, that the CBN has continued to emphasise that it will continue to intervene. Some of these policies have in one way or the other affected the banks’ performance generally,” he said.
An economist and financial analyst, Mr. Stephen Edwards, also said the fragile economic recovery constrained companies’ profitability. He explained that the much-trumpeted expansion in the economy, which had persisted in the last three quarters, as represented by improvement in macro-economic indices, failed to lift the fortune of companies operating in the country.
Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said a lot of the profit the banks made in the first quarter of last year was from investment in government securities when they were enjoying a yield of close to 22 per cent.
“If you compare that to this year’s, you will observe that the rates have dropped drastically; we are looking at Treasury bill (364 days TB) at nine to 11 per cent, when at the same time last year, it was about 18 per cent.
“So, for the banks, they have lost a lot of revenue from investment income in the Federal Government’s debt instruments and they have not been able to successfully switch their investment to loans, and it will take some time to adjust their books to quality credits,” Chukwu
observed.
