The cumulative pretax earnings for Nigerian lenders has topped N160 billion ($1 billion) for the first quarter of 2013 as earnings for the sector recover after the resolution of the banking crisis.
The twelve Nigerian banks that have released results had a total profit before tax of N161.3 billion in the first quarter of 2013 with N117 billion or 72 percent of the profits made by the top five -First Bank, Zenith, GTB, UBA and Access -tier one banks, according to BusinessDay’s analysis of data from their earnings report.
The banks’ cumulative earnings are up 20 percent from the same period in 2012.
The expectation for banks to continue the earnings out-performance is leading to a bid for bank stocks by investors.
The Bloomberg Nigerian Stock Exchange (NSE) Banking Index, which tracks Nigeria’s 10 biggest banks by market value, has advanced 23 percent this year, compared with a 34 percent rise in the wider NSE All Share Index (ASI).
Some individual bank stocks such as UBA which is up 88 percent year to date have out-performed the banking index.
Earnings are recovering in Nigerian lenders after the CBN in 2009 initiated banking reforms and set up the Asset Management Corporation of Nigeria (AMCON), a unique institution that combines buying non performing loans (NPLs), with loan restructurings and recapitalising troubled financial institutions.
The CBN reforms have led to the cost of risk for banks falling significantly, major balance sheet clean up, better underwriting standards, sustained net interest margins due to high lending interest rates and cheap funding, according to rating firm, Standard and Poor’s (S & P).
The strong bank earnings in the first quarter of 2013 are also being supported by positive tailwinds such as a strong macro-economic backdrop, high yields on government securities and juicy net interest margins.
Bank profits in the 3 months ended March 2013 represented about 1.3 percent of Nigeria’s Q1 2013 gross domestic product (GDP) of N11.3 trillion.
PATRICK ATUANYA
