Big Banks earn N2.01 trillion in income from investment securities in 4 years

Nigeria’s largest banks have earned N2.01 trillion in four years in income from investment securities as they continue to buy up local government bonds and treasuries that offer among the highest yields in emerging markets.

The yields are offering short term respite for lenders even as they’ve slowed down credit to the economy, but analysts are skeptical that such momentum will continue because the central bank will continue to mop out excess liquidity with Open Market Operations (OMO).

For the year ended December 2018, Zenith Bank’s income from investment securities was flat at N152 billion, this compares with 40.67 percent increase between 2017 and 2016 and 25.44 percent uptick between 2016 and 2015 financial years.

In the last four years, the lender has raked N501.13 billion from income from short and long term securities.

Guaranty Trust Bank (GTBank), the largest lender by market capitalization earned N329.56 billion in income from investment securities. A breakdown of the figure shows income from short and long term securities fell by 9.23 percent to N101 billion as at December 2018, but this compares with an 88.56 percent increase in income from investment securities between 2017 and 2016.

Access Bank’s income from short and long term securities increased by 24.74 percent to N103.81 billion in December 2018 from N83.22 billion as at December 2017, this compares with 85.43 percent increase in investment securities between 2017 and 2016. From 2015 to 2018, the lender realized N276.74 billion in interest income from short and long term securities.

United Bank for Africa (UBA)’s income from investment securities was up 34.16 percent to N154.15 billion in December 2018 from N114.90 billion as at December 2017.

Juicy yields have hindered Banks from lending to the economy as companies and businesses are increasingly becoming a risky investment.

Nigeria’s bonds have returned 6 percent this year and are the second best performing local debt in emerging market for the month of February, according tom data gathered by Bloomberg.

The DMO offered for subscription a total of N100 billion worth of bonds spread across 4-year (2023), 6-year (2025) and 9-year (2028) maturities at the auction. Investor appetite for the 2028 bond was strong as the bids were concentrated on the instrument.

The bids on the 2028 maturity were worth 5x (N100 billion) the offered amount (N20 billion). The DMO applied a stop rate of 13.5% across all the offered maturities, a moderation of no less than 100bps apiece from the stop rates applied at the February auction. At the auction, only N29 billion worth of bonds was sold out of the N100 billion on offer while the 2028 bond was fully allotted at N20 billion.

 

BALA AUGIE