Nigerian banks whose profitability has been hit by tight monetary policy and curbs to fee income may be close to getting some breather as the Central Bank of Nigeria (CBN) moves to possibly ease regulations on bank charges.

The CBN last week posted a circular to the banks requesting them to provide a list of products and services on which the prescribed charges in the current guide to bank charges (GBC) are insufficient to cover costs incurred by the banks.

“We view this as a positive development. The phasing out of commission on turnover (CoT) remains a key concern for investors in Nigerian banks, particularly considering the current plan for CoT to move to 0% from next year. We have noticed this year that the banks have become relatively more confident than in previous years on the unlikelihood of CoT being wiped out completely, and we think it was on the back of expectations that CBN intended to review the bank charges,” said Adesoji Solanke Sub-Saharan Africa Banking Analyst with Renaissance Capital said in a August 21 note.

The CBN also requested the banks to send a list of products and services that were existing as at 31 March 2013 (before the current GBC was introduced by former governor Sanusi Lamido Sanusi), which were not adequately covered by the current GBC.

The regulator sought to see a list of new products and services introduced since the current GBC came into effect in April 2013 and justification for them and a list of products and services that the banks plan to introduce in the short to medium term, their proposed tariffs and justifications.

Analysts say the wordings of the CBN circular has a positive spin for banks which have sold off as investors question their earnings generating capacity in the current tough macro environment.

The NSE banking index is down -16.03 percent this year to August 21, compared to the -13.79 percent fall in the wider all share index.

“The general lull in the equities market has been informed by investors’ apathy resulting from weak macro fundamentals, uncertainty about the FX rate and expectations of weak corporate earnings,” Olutola Oni, head of research at investment firm, WSTC financial services Ltd, said in response to questions.

Lenders in Nigeria have also been hit by the AMCON charge that mandates commercial banks to pay 0.5 percent of total assets to the sinking fund set up by the bad bank.

Further regulatory actions squeezing banks profits include revised banking charges that reduced ATM transaction fees.

Investors would cheer moves to ease some of the rules that hurt profitability even as some banks navigate the challenging macro terrain.

Guaranty Trust Bank, Nigeria’s largest lender by market value managed to generate Non-Interest Income of N39.1bn in the half year 2015 period (30 June 2014: N33.27bn) up by 17.6 percent.

“Despite regulatory headwinds and the resultant impact on certain fee lines, the bank recorded a gain in Non-interest income largely as a result of a significant growth in foreign exchange trading income,” the firm said in a statement on Friday.

http://businessdayonline.com/2015/08/banks-may-benefit-from-new-cbn-policy-reviewing-cot/ lalasticlala

Banks are crying.

nice one