Nigerian banks showed significant resilience in withstanding the much touted regulatory pressure last year, as they pulled in over N586 billion in pre-tax profit, evidenced in their recently released 2014 financials.

The implication, according to analysts, is that the stellar performance of the lenders could reflect positively on their share prices, further deepening the nation’s capital market, as well as enhance diposable incomes of shareholders by way of dividend pay-out by some of the banks.

Of note were the increased earnings from net interest income, an indication that the aggressive deposit mobilisation and risks asset creation, among others, are paying off, with positive impact on the financial inclusion policy of the Central Bank of Nigeria (CBN).

BusinessDay checks at the Nigerian Stock Exchange (NSE) show that the pre-tax profit level of listed Nigerian banks was remarkably 15.6% upside or N79billion higher, when compared to the 2013 financial year figure of N507.4bn.

Analysis of full year financials of all the quoted banks, except Skyebank, showed strength in their interest income, as well as fees and commissions income, while in some cases, others almost doubled their FX trading income year-on-year (y/y).

United Bank for Africa plc grossed N290.019billion in 2014 audited earnings, against N264.687billion in 2013. The bank’s profit before tax (PBT) rose slightly to N56.20bn from N56.05bn in 2013. Its net trading and foreign exchange income also rose to N32.411bn from N17.650bn in 2013.

Diamond Bank plc, on the other hand, reported 15 percent increase in 2014 gross earnings to N208.4 billion from N181.2 billion in 2013. The bank’s profit before tax dropped marginally by 12.5%, from N32.1 billion in the previous year to N28.1 billion. Net Trading Income (NTI) rose to N6.663bn from N4.636bn in 2013.

As a reactive measure to the external contagion and build-up of domestic pressure, the monetary policy committee (MPC) in its 24th and 25th November 2014 meeting, took the full policy dose at once and hiked by 100 basis points the monetary policy rate (MPR) from 12% to 13%.

Also increased was the Cash Reserve Ratio (CRR) on private sector deposits by 500bps from 15% to 20%; moved the midpoint of the official window of the foreign exchange market –in a strategic move that devalued the local currency at the official window. MPC also retained public sector CRR at its current level of 75%.

Analysts had estimated the increased CRR to potentially sterilise some N500 billion from the financial system, which reinforced the impact of the increased MPR on money market rates and the overall yield environment.

Other factors that had heightened the risks of banks dolling out impressive FY’14 numbers relate to weakness in oil price, normalisation of monetary policy in the United States, and domestic headwinds –especially rising pressure on the local currency and political uncertainties in the run-up to the 2015 elections.

Fidelity Bank plc reported gross earnings increase to N132.401bn in 2014, from N126.918bn in 2013. The bank’s PBT rose to N15.515bn in the review financial year, against N9.028bn in 2013.

Stanbic IBTC Holdings plc reported N130.611bn as 2014 gross earnings, compared to N111.226bn in 2013, indicating an increase of 17%. Its profit before tax rose 63% to N40.070bn, from N24.617bn in the 2013 financial year.

While Godwin Emefiele, the Central Bank of Nigeria (CBN) governor had doused concerns about the ability of banks to grow earnings through increased transaction volume and overall banking penetration, analysts had projected potential upside to banks’ earnings would be eroded by the regulatory pressure.

“Based on our estimate of private and public sector deposit mix, the effective CRR is about 32%, taking cognisance of excluded foreign currency deposits. We expect this new sterilisation measure to increase banks funding cost by additional 30bps, thus reinforcing the pressure on net interest margins of banks,” financial analysts at Associated Discount House Limited had said.

They also expected that banks with net foreign currency liability exposure, particularly due to recent Eurobond Offerings, would be further impacted by naira devaluation.

“We expect a few banks to see translation gains on consolidation of results from foreign subsidiaries; even so, we believe this will be modest,” the analysts said.

FBN Holdings plc recorded 21.3% year-on-year increase in gross earnings at N480.6 billion against N396.2 billion in the financial year ended December 2013. Its profit before tax of N92.9 billion was up 1.7% year-on-year against December 2013 level of N91.3 billion. Net gains on foreign exchange rose to N44.905bn from N6.693bn in 2013.

Interestingly, developments in the economy and monetary policy reaction left no ‘defensive’ at the stock market, as investors priced-in possible risk of decline in banks FY 2014 earnings –a move that impacted negatively on banking index, which has now peaked due to impressive earnings.

Union Bank plc also reported impressive gross earnings growth to N135.897bn in 2014 from N121.398bn in 2013. The bank’s profit before taxation rose to N27.708bn from a low of N3.769bn in 2013.

Access Bank plc recorded gross earnings growth of N245.1bn in 2014, up 19% from N206.8bn FY 2013. The bank’s profit before tax for the year 2014 was up 20% to N52bn, against N43.5bn in 2013.

Guaranty Trust Bank plc (GT Bank) grew its gross earnings by 15% to N278.520bn, from N242.665bn in the corresponding 2013. Also, the bank’s profit before tax rose by 9% to N116.385bn from N107.091bn in the corresponding financial year 2013.

Sterling Bank plc reported gross earnings increase by 13 percent to N103.7 billion against N91.743bn in 2013. In the same breadth, the bank’s profit before tax rose by 15.4 percent to N10.7 billion in 2014 against N9.31bn.

Wema Bank plc recorded 2014 profit before tax growth to N3.093bn from N1.947bn in the financial year 2013.

Zenith Bank plc earned N403.343bn last year from N351.470bn in 2013, an indication of 14.8% increase. The bank’s profit before tax rose by 8.3% to N119.796bn from N110.597bn in 2013.

Also, FCMB Holdings recorded 13% increase in 2014 gross earnings to N148.637bn from N130.995bn in 2013. The Holdco recorded 32% increase in profit before tax to N23.942bn, from N18.184bn.

http://businessdayonline.com/2015/04/banks-show-strength-against-regulatory-headwinds-with-n586bn-profit/#.VTVt-yFViko

lalasticlala, Seun