Banks hope to beat Q1 as half year results loom

Nigerian banks will be seeking to outperform their slightly underwhelming First Quarter results as the beginning of earnings season loom.

Banks are still struggling to overcome regulatory headwinds that crimped profits last year.

Bankers incurred huge operating and loan loss expense in the first quarter (Q1) as the cumulative pretax profit of 14 commercial banks which have released Q1, 2014 results, shrank by 5 percent, to N152.66 billion from N161.13 billion in the preceding year, BusinessDay’s analysis of lenders results show.

The cumulative gross earnings of the lenders in Q1 2014 rose by a mere 2 percent year on year to N641.10 billion as against N627.79 billion the preceding year.

Nigeria lenders loan loss expense, which measures the amount banks set aside as allowance for bad loans surged 68.90 percent to N16.74 billion in Q1 2014 from N9.91 billion in the preceding year, analysis of the data shows.

Loan losses may increase as banks expand credit to retail customers and corporate.

The average loan-to-deposit ratio for the 14 banks rose to 61.22 percent in the first quarter of 2014 from 57 percent a year earlier, as lenders sought to replace profits lost to higher cash reserve requirements (CRR), tighter monetary policy and regulation aimed at lowering fees and increasing competition.

Loan-to-deposit ratios measure how inclined bankers are about lending, with higher numbers signaling a more aggressive stance.

Lenders total deposits rose slightly by 1 percent to N15.0 trillion, from N14.88 trillion in 2013.

The Central Bank of Nigeria (CBN) has set a prudential requirement of a maximum loan to deposit ratio of 80 percent for Nigerian banks.

The Nigerian Stock Exchange Banking Index is down -3.08 percent, year to date.

 

PATRICK ATUANYA & BALA AUGIE