Over N262 billion has been provided as non-performing loans, as at the end of September, for 12 of the 14 banks declared healthy by the Central Bank of Nigeria (CBN) following a directive it issued to all commercial banks that they should publish financial accounts with full provisions for loan losses.
The Central Bank also instructed the remaining 10 banks - the troubled ones - to submit a six-month plan on how they intend to return to profitability.
During the period in view, the United Bank for Africa Plc recorded the highest provision for non-performing loans of over N41.07 billion, while Ecobank Nigeria, Skye Bank, Access Bank and First Bank of Nigeria followed with N33.39 billion, N32 billion, N30.39 billion, and N29.50 billion.
Analysts say the current development in the banking industry will boost investor confidence. The Financial Advisor at Resource and Trust Company Limited, Opeyemi Agbaje, said the practice of disclosing bad loans is good for investors because they (investors) can now start to analyse transparent financial results.
“I think it is a good development because now we’ll know the true conditions of all the banks. By the time they write-off their bad loans, investors will know what is actually left of their balance sheet. We’ll see how much capital they truly have and we’ll know the reality of the financial system. Then the banks can start on a new scale with a clean balance sheet and clean loan portfolio,” he said.
First City Monument Bank Plc’s audited result for the year ended April 30, shows high gross earnings of N71.658 billion against N52.818 billion in 2008; representing 35.67 per cent increase. Profit after tax and provision for losses stood at N3.994 billion compared with N15.109 billion in 2008; 73.57 per cent decline in profit.
The company’s Board of Directors, in a statement to the Nigerian Stock Exchange on Friday, stated that the “Appropriation of profits for the financial year ended April 2009, whether to cash dividend, bonus or transfer to reserves would be communicated as soon as the CBN approval is received.”
Meanwhile, the bank’s unaudited result for the half year ended October 31 shows gross earnings of N35.206 billion, as against N40.793 billion in the comparable period of 2008. Loss before tax stood at N479.2 million compared with profit after tax of N9.368 billion in 2008.
The unaudited financial account of Stanbic IBTC Bank for the third quarter ended September 30, showing gross earnings of N42.798 billion, against N47.135 billion in the comparable period of 2008. Profit after tax and exceptional items stood at N3.718 billion compared with profit after tax of N10.575 billion in 2008. The bank reported an exceptional provision charge of N5.905 billion which represents additional provisions on loans and advances (N5,339 million) and other assets (N566 million) arising from the CBN special examination.
Stanbic IBTC has forecast gross earnings of N58.105 billion and profit after tax of N8.886 billion during the fourth quarter ending December 31.
NIGERIAN BANKS POSITION THEMSELVES FOR MERGERS
* Audit, common year-end gives clearer view on sector
* Higher loan loss provisioning surprises investors
Nigerian banks are positioning themselves for a second round of consolidation after an industry-wide audit and tighter accounting rules exposed the strengths and weaknesses of their rivals.
The central bank has injected around 600 billion naira ($4 billion) into the banking system since mid-August after its auditors found nine institutions had built up bad loans which left them too weakly capitalised to sustain operations.
It has since demanded all of Nigeria's 24 banks publish accounts as at the end of September detailing full provisioning for loan losses, a new departure in a country where corporate disclosure levels lag even smaller rivals such as Kenya.
The move, which comes ahead of the introduction of a common financial year in December, has for the first time forced banks to fully provide for non-performing loans, giving a clearer basis for comparison across the sector.
"Even until late last year, banks were still declaring profits, and all of a sudden we're seeing huge losses and provisions," said Wole Famurewa, banking analyst at Lagos-based PHB Asset Management.
"Investors are panicking because they are surprised at the level of provisioning," he said, noting that even conservative lenders considered to be among the country's strongest had posted higher provisions than many analysts expected.
Shareholders in Equitorial Trust Bank have pledged to diversify its capital base either through a public offering of shares, securing a core investor or merging with a local bank within a year, the central bank said on Thursday.
Brokerage Renaissance Capital said in a report last week it believed the most prized acquisition targets would include Diamond Bank, Ecobank Nigeria, Fidelity Bank and Skye Bank, all of which passed the audit and which it said offered solid niche businesses.
But Henry Ogbuaku, head of research at Express Discount Asset Management in Lagos, said such mid-tier banks might seize the opportunity to grow their own market share and view any attempt to take them over as a hostile bid.
* Higher loan loss provisioning surprises investors
Nigerian banks are positioning themselves for a second round of consolidation after an industry-wide audit and tighter accounting rules exposed the strengths and weaknesses of their rivals.
The central bank has injected around 600 billion naira ($4 billion) into the banking system since mid-August after its auditors found nine institutions had built up bad loans which left them too weakly capitalised to sustain operations.
It has since demanded all of Nigeria's 24 banks publish accounts as at the end of September detailing full provisioning for loan losses, a new departure in a country where corporate disclosure levels lag even smaller rivals such as Kenya.
The move, which comes ahead of the introduction of a common financial year in December, has for the first time forced banks to fully provide for non-performing loans, giving a clearer basis for comparison across the sector.
"Even until late last year, banks were still declaring profits, and all of a sudden we're seeing huge losses and provisions," said Wole Famurewa, banking analyst at Lagos-based PHB Asset Management.
"Investors are panicking because they are surprised at the level of provisioning," he said, noting that even conservative lenders considered to be among the country's strongest had posted higher provisions than many analysts expected.
Shareholders in Equitorial Trust Bank have pledged to diversify its capital base either through a public offering of shares, securing a core investor or merging with a local bank within a year, the central bank said on Thursday.
Brokerage Renaissance Capital said in a report last week it believed the most prized acquisition targets would include Diamond Bank, Ecobank Nigeria, Fidelity Bank and Skye Bank, all of which passed the audit and which it said offered solid niche businesses.
But Henry Ogbuaku, head of research at Express Discount Asset Management in Lagos, said such mid-tier banks might seize the opportunity to grow their own market share and view any attempt to take them over as a hostile bid.
BLUE CHIP STOCKS CONTRIBUTE TO MARKET WOES
The Nigerian Stock Exchange has attributed the continuous bearish trend witnessed at the capital market to the decline in the prices of some highly capitalised stocks.
In its stock weekly report, last Friday, the Exchange stated that the drop in the prices of these equities, though infinitesimal, had negative effect on measuring indices – the market capitalisation and the All-Share Index.
At the close of trading last week, eight of the 15 most capitalised stocks depreciated in share prices. Ecobank Nigeria Plc, First Bank of Nigeria Plc, United Bank for Africa Plc, Zenith Bank Plc, and Stanbic IBTC Bank Plc shed N0.92, N0.71, N0.35, N0.04, and N0.02 per share, respectively.
The Exchange’s market capitalisation of the 198 First-Tier equities closed lower on Friday at N5.076 trillion after opening the week at N5.143 trillion; representing over N67 billion loss or 1.30 per cent decline. The NSE All-Share Index dropped by 1.32 per cent to close on Friday at 21,517.29 basis points from 21,804.69.
One of the four sectoral indices appreciated; the NSE Food/Beverages Index rose by 1.94 per cent to close at 494.41. However, The NSE Banking Index dropped by 2.8 per cent to close at 346.28. The NSE Insurance Index dropped by 2.41 per cent to close at 290.12. The NSE Oil/Gas Index dropped by 1.1 per cent to close at 299.94.
A total of 33 stocks appreciated in price during the week, lower than the 41 in the preceding week. Nestle Nigeria Plc led the gainers’ table with a gain of N21.93 to close at N235.93 per share while Unilever Nigeria Plc followed with N4.15 to close at N19.22 per share.
On the other hand, 59 stocks depreciated in price against 55 in the preceding week. Lafarge Cement WAPCO Nigeria Plc led on the price losers’ table, dropping by N2.00 to close at N29.00 per share while Flour Mills of Nigeria Plc followed with a loss of N1.95 to close at N33.87 per share.
A turnover of 2.4 billion shares worth N14.65 billion in 31,070 deals was recorded last week, in contrast to the 1.95 billion shares valued at N11.4 billion exchanged last week in 30,579 deals.
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