Banks’ stellar performance in their first quarter outing despite headwinds may be consolidated and improved upon by the recent harmonisation of Cash Reserve Ratio (CRR) by the Central Bank of Nigeria, (CBN) analysts have said.

With cumulative net profit of 15 bank’s which have released their first quarter earnings, increasing by 18.88 percent, to N178.13 billion, compared with the industry’s 8.51 percent earnings growth in the earlier period, analysts say the new policy may have provided enough funds for real intermediation by the lenders, which had previously been lacking.

They argue that the consequence of the policy would be higher earnings for banks in the full year, on account of the positive impact from the lowering of cash reserve ratios by the CBN.

“The decision of the CBN to harmonise the CRR on private and public sector deposits to 31 percent is broadly positive for banks’ earnings in the coming quarters,” said Tajudeen Ibrahim, analyst with Chapel Hill Denham, in a May 19 e-mail to BusinessDay.

“We expect banks to have more funds available for lending to drive interest income growth, as about N500 billion will be freed in terms of banks reserves with the CBN, by our estimates. Thus, we could see bank stocks rally over the next couple of days,” Ibrahim explained.

Kayode Omosebi, equity research analyst with United Capital, in an e-mail statement to BusinessDay said, “There was a modest growth in loans, higher yield on assets, stable accretion of fee and trading income and growth in volume of business in the first quarter.

“This led to a higher net interest margin with a major impact of interest earnings assets and moderated funding cost.”

The cumulative cost-to-income ratio which shows the efficiency of a firm in minimising costs while increasing profits, also reduced to 54.18 percent, from 58 percent in 2014. The lower the cost-to-income ratio, the more efficient the firm is running.

The Monetary Policy Committee (MPC) of the CBN, on May 19, left the benchmark interest unchanged at 13 percent point. But inflation increased to 8.7 percent in April, close to the top of the bank’s 6 percent to 9 percent target band.

The CBN also decided to set a unified cash reserve ratio for public- and private-sector funds at 31 percent to improve the transmission of monetary policy. Previously, the rate for private-sector funds was 20 percent and 75 percent for public funds.

However, the cumulative operating expenses of the 15 commercial banks increased by 8.1 percent to N325.67 billion, compared to N301.08 billion last year.

Industry loan to deposit ratio jumped to 66.66 percent in 2015 from 58.78 the previous year. The higher ratio means Nigerian lenders were aggressive about lending in the period.

Loans and advances to customers also increased by 17.73 percent to N12 trillion, from N10 trillion the previous year, as banks focus on risk management through portfolio diversification.

The total assets of lenders in the first quarter of 2015 was N26.4 trillion, which is 32.5 percent of Nigeria’s rebased GDP of N80.22 trillion.

The CBN also devalued the naira, as falling oil price overwhelmed foreign exchange and consequently the foreign reserves. And the naira had lost more than 13 percent of its value against the dollar in the past six months, and was trading 0.2 percent stronger at 199 to a dollar by 3:47 p.m. in Lagos.

“Further devaluation of the naira is clearly what should be done; the currency should be allowed to move to its equilibrium level which is around N210-N220. The relative stability we have witnessed in the FX market is not likely to be sustainable,” said Omosebi.

Nigeria’s foreign reserves stood at $30 billion on May 15, down 20 percent from a year ago. Analysts say policy makers could also raise the interest rate to curb inflation.

“A hike in interest rates would be positive for banks,” said Saheed Bashir, equity research analyst with Meristem Limited, a research firm in an emailed statement.

http://businessdayonline.com/2015/05/banks-to-surpass-q1-positive-outlook-on-back-of-new-crr-policy/#.VV7NfPlViko

Ishilove, lalasticlala, Seun

Nice one.
If these First quarter reports are not cooked ba.

1.

“We expect banks to have more funds available for lending to
drive interest income growth, as about N500 billion will be
freed in terms of banks reserves with the CBN, by our
estimates. Thus, we could see bank stocks rally over the next
couple of days,”

2.

The cumulative cost-to-income ratio which shows the
efficiency of a firm in minimising costs while increasing
profits, also reduced to 54.18 percent, from 58 percent in
2014. The lower the cost-to-income ratio, the more efficient
the firm is running.

Low cost-to-income ratios because they pay slave wages and treat staff like crap 3.

“A hike in interest rates would be positive for banks,”

This is funny - a hike in interest rates would be positive for banks? Who will the banks lend the money if the interest rates are too high?

well................. dey shud study hard b4 implementing it.....................lik dis man below

I smell higher inflation soon, the rate at which they are mobbing money out of the economy lenders are smiling now abi because of high interest rate. This guys always forget that Nigeria's economy is not ruled with theoretical base I.e what is written in the book. I wonder how they do their projections.

Wetin concern me??



What effect will it have in a corrupt country?

We hope it translates into meaningful impact for Nigerians.

v

this should trickle down to their staffs welfare.

wetin dem dey try explain abeg?

Another economist/activist will soon come and criticise dis move by CBN on TV or write a column on a daily. When u now give dem d job of CBN gov or Finance minister, they'll perform worst than d predecessor.

well............. make una no go spoil am with corruption at d end

Ok

BrB

How do u know, reports are cooked? Ve u ever cooked one before?

kennygee:
Nice one.
If these First quarter reports are not cooked ba.

mtchew

This is Nigeria, in a sheet of paper we are well develope nation but when it comes to reality we have nothing to offer. May God see us through. :-

olatricia:
How do u know, reports are cooked? Ve u ever cooked one before?

Na today?

only in the zoo republic do banks make profit while the production sector makes loss

Let's hope the incoming Ab0ki will understand any of these things...
All he talks about is Arrest this, kill that, probe that. Cook this....

World's Dullest president...
From ClueLESS(Jonathan) to BrainDEAD(Buhari)

I cross legs dey wait.

Ehn ehn, Wc one did u cook? Are u a cooker?

kennygee:


Na today?

CBN saying crap since 1900

big lie, most banks had low public sector funds cos it was useless at 75% CRR. wit the harmonisation. d private sector funds held by banks will take a big hit. cbn sent a circular ydae crr will be debited weekly as against fortnightly. CBN/ Emefiele are jokers i swear. bankers are facing increased deposits targets soon. SMH GMB force dis clown to resign o

maxit2:
Let's hope the incoming Ab0ki will understand any of these things...
All he talks about is Arrest this, kill that, probe that. Cook this....

World's Dullest president...
From ClueLESS(Jonathan) to BrainDEAD(Buhari)

I cross legs dey wait.

Common Sense you don't have........
I wonder where youth like your kind should fit in a soceity like ours. May God help our youth to be very constructive and intelligent in moving this nation forrward.

There won't be so much impact due to several reasons. First, most revenue accounts of the FGN have been moved to CBN further reducing liquidity. Secondly, Public sector funds do not stay in the system long enough for the banks to earn maximally. Coupled with the additional 11% on Private deposits, it could be a double-edged sword.

ernie1234:

Common Sense you don't have........
I wonder where youth like your kind should fit in a soceity like ours. May God help our youth to be very constructive and intelligent in moving this nation forrward.

I curse your generation this day.
.
The ONLY curse is that they be as intelligent as you. nothing less nothing more.

2

up nepa