These are not the best of times for banks in the country as some developments in the economy have negatively affected their performance on the Nigerian Stock Exchange, SIMON EJEMBI writes

Tougher regulation and policies by the Central Bank of Nigeria, the devaluation of the naira and other economic headwinds have changed the fortunes of Deposit Money Banks in the country significantly, it has been gathered.

The banks, which have mostly battled in futility to grow their profit margins in recent times, have seen their share prices and market capitalisation decline as well.

Between January 1, 2014 and Friday, February 28, 2015, the total market capitalisation of the banking sub-sector had declined by 24.5 per cent or N720bn to N2.219tn. This is despite the rights issue embarked upon by some of the banks, which significantly increased the capitalisation.

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The dwindling fortunes of the banks are also reflected in the Nigerian Stock Exchange Banking Index, which is designed to provide an investable benchmark to capture the performance of the banking sector.

The index, which comprises the 10 most capitalised and liquid companies in the banking sector, emerged the Exchange’s worst performing sectoral index in 2014 after it fell by 21.53 per cent.

Despite the rally by equities over the last two weeks, which has seen the banking index improve, between the start of 2014 and the close of trading on Friday, the index had depreciated by 26.82 per cent.

According to market analysts, some bank stocks are currently at four-year lows in terms of value.

The shares of virtually all the banks on the banking index declined over the 14-month period reviewed by our correspondent.

Unity Bank Plc, whose share price has remained unchanged at 50 kobo per share, as well as Ecobank Transnational Incorporated Plc and Union Bank of Nigeria Plc that appreciated by 1.2 per cent and 2.18 per cent, respectively as of Friday are the only exception.

As of Monday last week, ETI and UBN were down by 1.2 per cent and 7.4 per cent, respectively.

As for the others, Access Bank Plc was down by 33.3 per cent; Diamond Bank Plc had shed 46.9 per cent; while Fidelity Bank Plc and Guaranty Trust Bank Plc declined by 52.4 per cent and 13.03 per cent, respectively.

Others are Sterling Bank Plc, with 4.8 per cent drop; United Bank for Africa Plc, with a share price depreciation of 61 per cent; and Zenith Bank Plc, which was down by 35.8 per cent.

Skye Bank Plc and Wema Bank Plc, which are not in the banking index, were down by 53.9 per cent and 20.5 per cent, respectively.

Financial institutions, which have banks as subsidiary, did not fare any better.

The shares of FBN Holdings Plc and FCMB Group Plc, the parent companies of First Bank Nigeria Limited and First City Monument Bank Limited, declined by 52.1 per cent and 40.4 per cent, respectively over the review period.

Stanbic IBTC Holdings Plc, the parent company of Stanbic IBTC Bank Limited, however, appreciated by 17 per cent.

Analysts have attributed the poor performance of the banking sector to a series of negative and unfavourable developments in the economy as well as the failure of several of them to focus on retail banking, among others.

The Head, Research and Investment, BGL Plc, Mr. Femi Ademola, said the most important problem facing the sector was the uncertainty about it.

Ademola traced part of the problem to the changes at the CBN, saying, “The typical thing in Nigeria is that anytime we have a change at the central bank, everyone will come around with their own processes, which can cause disruption in the market.

“In 2004, we had to do capitalisation, which was shocking because it wasn’t planned for in terms of magnitude. That caused a disruption because some banks had to go under because they couldn’t meet the requirement to recapitalise. Since then, we have been having uncertainties about the banks.”

He said the uncertainties continued when Mallam Lamido Sanusi became the CBN governor and embarked on reforms, which affected more banks, with investors losing a lot.

“Since then, bank stocks have become more like a watch-me stock,” Ademola said.

He added that the manner in which Sanusi exited the CBN as governor and the subsequent appointment of Mr. Godwin Emefiele did not help matters, adding that there were still uncertainties about the current governor’s plans for the banks.

“Another thing affecting banking stocks is that they are the most liquid stocks in the market; banks have the highest number of outstanding shares and they have the most number of investors,” Ademola said.

What that means, according to him, is that the shares are very volatile and depending on the investor sentiment, unfavourable developments in the economy can easily affect them.

He explained that apart from the impact of the increase of the Cash Reserve Requirement for banks, the CBN had been very harsh on them, reducing such things as the Commission on Turnover over time, leading to declines in their incomes.

“Also, if you check the performance of the banks, it has been from cash round-tripping. That is, they take money from the public sector and take the money back to the public sector either through the CBN or purchase of Federal Government bonds and Treasury bills,” the analyst said.

He, however, said some “discerning investors” knew that that was not sustainable and that banks had to lend and perform their traditional functions.

With some of the banks exposed to the oil and gas sector and foreign exchange pressure, with some of them obtaining Tier 2 capital, their performance is not expected to improve anytime soon.

Global rating agency, Fitch Ratings, which had last year predicted a drop in the profit of Nigerian banks this year, also expects them to have a rough year.

In a new report entitled: ‘Nigerian banks: Oil shock and policy moves test bank resilience and ratings’, the agency projected that the non-performing loans of the banks were expected to rise above the CBN’s informal cap of five per cent by year-end.

Although the rating agency affirmed the Long-term Issuer Default Ratings of 10 Nigerian banks, with all outlooks being stable, it pointed out the high credit concentration of the banks as well as emerging risks, particularly in the oil and gas, and power sectors.

It also noted that “the operating environment is affected by persistently low oil prices, continuing pressure on the domestic currency, the naira, likely further monetary policy and regulatory actions, and increased political uncertainty.”


http://www.punchng.com/business/financial-punch/nigerian-banks-lose-24-5-of-market-value/

What do you think about this report? Your opions are welcomed.....

so this is why GTBank deducted 350 from my account last month
choi !!!!!!!!!!

Na lie

Typical Nigeria,nobody cares.our currency no longer has value. Sentiments aside,the whole gej led economy team is weak

Gbege go de oooo

PDP!!! See your handiwork

GEJ! NEVER NEVER NEVER AGAIN!!!

Goodluck paper transformation.

is it oil that is causing all this or the banking sector has been reckless with money?

Our Economy has crashed, we are not saying or doing anything about it.

Instead na GEJ till 2019 and Sai Buhari pple dey talk.

People be playing with hunger.

Not just the banking sector, but it'll get better.

kennygee:
Our Economy has crashed, we are not saying or doing anything about it.

Instead na GET till 2019 and Sai Buhari pple dey talk.

People be playing with hunger.

What do you suggest can be done about the economy?

or get worse and worst, i once said it in the beginning of this year, either gej or gmb, we are going through thunderstorm this year.

Vivipop:
Not just the banking sector, but it'll get better.

It's nice nau...we keep loosing nd soon all d banks in d country will merge..

But they said the economy is growing stronger....isn't it again? Sigh !

This is no longer news, it's as a result of the vagaries and uncertainties of the entity called Nigeria. Election, falling oil price etc. Most foreign investors that are not risk averse have all withdrew their hard earned cash to other markets and economies that are more profitable. Once these uncertainties have been minimized, they'll rush in again in mass to invest.
Now is the time for the local designed investors to be on the lookout for opportunities to pitch their tents.

God bless Nigeria!

Oil prices are going down.

And everyone is losing money....including the banks.

PDP has failed us....by refusing to get us off oil....and into industrialization.

Last week....peak power supply was less than 3500MW....and we need 12500MW. And they tell us that transformation is happening.

Nigeria's govt needs to do better. Much better.

I feel the fresh air my foot

Still waiting to read about the positive impact of naira devaluation, cos every development in this country is paper based.

#idecidedalongtimeago

Good for them,wanting to make increase in profit @ all cost at d expense of contract staff and giving loans to cabals and avoiding genuine entrepreneur. *making FP is not a joke o, off shirt leave trouser runs to river to cool off heat**

My family and i will nt vote for buhuari but for prof osinbajo! The first brilliant vice president Nigeria have never had!

searching4love:



ANOTHER ACHIEVEMENT OF THE GEJ ADMINISTRATION.


HE IS REALLY TRANSFORMING THE COUNTRY BUT UPSIDE DOWN


I BLAME THE DUMB PROFESSOR WHO APPROVED GEJ'S DOCTORATE THESIS.

GEJ'S DECISION MAKING MAKES DOCTORATE DEGREE LOOK LIKE A JOKE

what has his thesis got to do with the topic?
Some Nlanders are crazy mofos.

englishmart:
I don't care..... Provided my account isn't affected

You should....when inflation makes your money valueless....and when the constant downturn makes banks go out of business.

Seriously.....the way we run economics in this country is bad. We should stop relying on sales of raw materials.....and become an innovative economy.

PLEASE DEAR( YES I MEAN YOU)....KINDLY HELP A SISTER WIN A COMPETITIOM BY SIMPLY LIKING HER POST...HERE'S A LINK TO THE POST.
https://m.facebook.com/story.php?story_fbid=1615311108701321&id=1603852676513831&refid=17

OLAplusONE:
But they said the economy is growing stronger....isn't it again? Sigh !

All those saying the economy is growing stronger are not facing reality.

The fact is , we are a Dutch diseased economy that is strong when the oil price is high. Now...oil is at $60 a barrel. For Nigeria to meet its financial obligations...oil has to be $123 a barrel. Not going to happen....ESPECIALLY when everyone and his grandmother is producing oil.

My annoyance with the PDP govt is that they think that oil will save us. Fact is....it won't. Whoever is in charge from May this year better make sure we get up to 20000mw of electricity in the next five years.....so that we can get closer to a non oil INDUSTRIAL economy. Nigeria needs to get rid of the idea that producing oil makes you a strong economy. It does not. It only makes you a weak and dependent economy.

ok

steppin:

what has his thesis got to do with my father's madness
My parents are crazy mofos.

Fixed

We dont care if all the banks lose everything. what we know is GEJ till 2019!!!!!

Sai GEJ.

searching4love:



ANOTHER ACHIEVEMENT OF THE GEJ ADMINISTRATION.


HE IS REALLY TRANSFORMING THE COUNTRY BUT UPSIDE DOWN


I BLAME THE DUMB PROFESSOR WHO APPROVED GEJ'S DOCTORATE THESIS.

GEJ'S DECISION MAKING MAKES DOCTORATE DEGREE LOOK LIKE A JOKE

Thank you o jire omo iya mi

Dragonking:
We dont care if all the banks lose everything. what we know is GEJ till 2019!!!!!

Sai GEJ.

Madness!!!