22042019 - ACUTE HUNGER: Outrage as IDP children feed on onion leaves

20 — Vanguard, MONDAY, APRIL 22, 2019
FINANCIAL VANGUARD
COVER
How low yield, high NPL took toll on tier-1 banks’ performance
Continues from page 19
2018 (Q4’18), while average
NPL in 2018 w<strong>as</strong> 15.02 percent.
According to Mr. Johnson
Chukwu, Managing Director/
CEO, Cowry Asset
Management, a Lagos-b<strong>as</strong>ed
investment banking firm,
decline in yield curve led to
loss of major income sources for
the banks during the year.
He, however, said that the
tier-1 banks showed resilience
considering the challenges in
the business environment.
Zenith Bank in mixed
results
Financial Vanguard’s
analysis showed that Zenith
Bank Plc topped the earning
spot in absolute figures though
it recorded a huge 15.4 percent
decline in its earning.
Specifically, the bank’s gross
earnings stood at N630.34
billion, 15.4 percent decline
against N745.19 billion in 2017.
FBN Holdings Plc, which also
recorded decline in its
earnings, ranked second in
absolute figures, posting
N585.95 billion <strong>as</strong> revenue
against N597.76 billion in 2017.
Access Bank placed third in
absolute figures, but topped
others in percentage growth.
The bank recorded N528.7
billion gross earnings, 15.2
percent incre<strong>as</strong>e compared to
N459.08 billion recorded in the
previous year.
UBA Plc w<strong>as</strong> the next with
N494 billion gross earnings,
which represents seven
percent incre<strong>as</strong>e over N461.6
billion recorded in 2017, while
GTBank posted N434.7 billion
gross earnings, representing
3.7 percent incre<strong>as</strong>e against
N419.2 billion in the
corresponding year.
Access leads profit growth
rate
Access Bank Plc with 32
percent incre<strong>as</strong>e in pre-tax
profit topped other tie-1 banks.
It grew its profit before tax to
N103.2 billion from N78.2
billion in 2017. FBN Holdings
placed second with 19.7 percent
growth to N65.29 billion from
N54.52 billion; Zenith Bank Plc
took the third position,
recording 16.2 percent incre<strong>as</strong>e
in its pre-tax profit to N231.7
billion from N199.3 billion.
GTBank ranked fourth with 9.1
percent incre<strong>as</strong>e to N215.6
billion from N197.7 billion,
while UBA achieved 2.4
percent pre-tax growth to
N106.8 billion from N104.2
billion in 2017.
Analysts comment
Commenting on the banks’
performance, Chukwu said:
“Given the environment the
banks operated in 2018, though
their earnings w<strong>as</strong> almost flat,
I believe that tier-1 banks
showed resilience because if
you compare the economic
environment, especially the
yield curve in the environment,
you will observe that yield on
federal government debt
instruments declined
materially in 2018, which led
to loss of major income source
for the banks.
So, for the banks to have been
able to achieve about the same
level of earnings, w<strong>as</strong> a mark of
resilience on their part. The
other factor that worked against
them w<strong>as</strong> the incre<strong>as</strong>e in nonperforming
loan; we saw
incre<strong>as</strong>e in non-performing loan
at about 15 percent in 2018.”
Continuing, he said: “The
reality is that growth in the
economy h<strong>as</strong> remained very
weak and that is why instead of
improvement, we are seeing
deterioration in <strong>as</strong>set quality. Of
course, if you look at the Gross
Domestic Product (GDP) growth
in 2018, it w<strong>as</strong> only 1.92 percent,
which is almost in tandem with
what you saw in the
performance of the banks.
The reality is that the economy
remained sluggish. Therefore,
there w<strong>as</strong> no improvement in
opportunities available to the
banking sector in the economy,
rather the banks experienced
loss in yield and incre<strong>as</strong>e in
non-performing loans.”
Bank MDs explain result
Chief executive officers of the
banks attributed the outcome of
the year’s business to stringent
and tough operating
environment.
Mr. Kennedy Uzoka, Group
Managing Director/CEO, UBA,
pointed to weak economic
growth, but stated that the bank
focused on retail deposit
mobilisation to stay above
board.
“Defying the relatively weak
economic growth in Africa,
earnings were positive and we
grew our balance sheet by 20
percent, driven by the 23 percent
growth in our deposit funding.
In a period of economic
uncertainty, we have focused on
retail deposit mobilisation, with
exciting results,” Uzoka said.
Mr. Segun Agbaje, MD/CEO,
GTBank, speaking on the
financial results, said: “In 2018,
our focus on staying nimble,
strengthening customer
relationships and driving our
digital-first strategy paid off.”
He said that the bank
successfully navigated the
pressures of its challenging and
radically changing business
environment, recorded growth
across key financial indices and
reaffirmed its position <strong>as</strong> one of
the best performing and well
managed financial institutions
in Africa.
Herbert Wigwe, GMD/CEO,
Access Bank, said: “2018
marked a significant year of
progress for the bank amid an
unfavourable macro climate. We
made solid progress throughout
2018 in line with our 2018-2022
five-year strategy and we
remain committed to the
achievement of our strategic
imperatives going forward <strong>as</strong>
we continue to invest in our
people and technology in order
to improve operational
efficiency.”
Peter Amangbo, MD/CEO,
Zenith Bank, said: “Due to a
challenging macroenvironment,
gross earnings
and interest income reduced by
15 percent and seven percent
respectively, driven by declining
trading income, compressed
yields on <strong>as</strong>sets, and a
reduction in the loan book by
10 percent.
“Despite the decline in gross
earnings, the Group mitigated
these knock-on effects through
growth of its net interest income
and operating income by 15
percent and eight percent
respectively <strong>as</strong> it w<strong>as</strong> able to
ensure improved cost
efficiencies across the
business.”
2019 outlook
Analysts at United Capital Plc
in their outlook for the banking
industry in 2019 said that the
elevated yield environment and
potential post-election
uncertainty, suggests that
banks may sustain the recent
deployment of funds to financial
<strong>as</strong>sets amid policy
normalization in the US and
incre<strong>as</strong>ed liquidity mop-up
exercise by the Central Bank of
Nigeria (CBN). “The yield
environment is, however,
expected to retrace in H2-19 in
the event of a successful and
smooth transition. This may hurt
bottom lines,” they said.
Chukwu of Cowry Asset
Management said that 2019
would remain largely the same
for the tier-1 banks. We may see
a marginal improvement in
GDP growth rate, which will not
be sufficient to lead to reversal
in the high level of nonperforming
loans.
“So, the banks will have to
continue to contend with
balance sheet that is weakened
by high level of NPL. The other
factor is that we have seen the
yield environment trending
southwards.
“So, they may come under
further suppression in yield in
the coming months. However,
I think the banks will leverage
some of the on-lending facilities
that the CBN is providing,
including the discretionary c<strong>as</strong>h
reserve policy that the CBN
recently introduced, which
allows them to claw back
amounts in reserve for loans
granted to some specific sectors
of the economy.”