MD, GTBank Segun Agbaje

By Festus Akanbi

As the 2012 third quarter unaudited results of quoted money deposit banks make their ways to the public domain, a wave of excitement has returned to the camp of Nigerian shareholders who described the various impressive results of the banks as dividend of their belief in Nigerian financial institutions.

The results, most of which have already been submitted to the Nigerian Stock Exchange (NSE), showed a profound improvement in virtually all the indices, with financial analysts saying it is time for the shareholders to take position in the banks although the shareholders are calling for a sizeable chunk of the earnings in terms of dividend.

A random scan of some of the results last week showed that most of the banks recorded significant leap in their profit margins, although modest improvement was recorded in the area of deposit mobilisation except for some of the banks that went into merger and acquisition last year.

CEO, Partnership Investment Company, Mr. Victor Ogiemwonyi, in his reaction to the positive signals from banks said, “The recent string of good results the banks are reporting is a good sign. It shows the reforms are taking hold and that the banking industry is poised to be the engine of growth for the Nigerian Stock Exchange for the next several months. The third quarter results and the general good economic environment lowering inflation, moderating interest rates and improving external reserves all point to an economy looking up. This will mean that the banks will report good profits and will likely be paying dividends next year. This may make banking stocks attractive to investors.

“We expect improved market activities as investors pile into the market to take advantage of the low valued stocks that will rise as the overall market respond to the upswing.”

According to the analyst, time had come for discerning investors to key into the current improvement in banks performance, saying “ Investors should take the opportunity to re- balance their portfolios and make risk management an important part of their portfolio decision making.”

An analysis of the third quarter performance for instance showed that Access Bank Plc, one of the banks that explored the window of mergers and acquisitions last year recorded a breakthrough in its nine months operation this year. Last year, the bank posted a profit before tax of N18.077 billion for its nine-month operation. However, in what has been interpreted as the added value of the acquisition of the defunct Intercontinental Bank Plc, Access Bank was able to declare a profit before tax of N39.112 billion in nine months this year, while its gross earnings jumped from N86.3 billion last year to N162 billion for the first nine months of the current operating year.

Zenith Bank Plc which posted a profit before tax of N53.130 billion last year recorded N75.223 billion in the period under review while its gross income jumped to N229.161 billion from N183, 067 billion. Its shareholders fund for nine months for 2011 put at N394, 268 billion moved up to N421, 307 billion this year. Its customer deposits, which was N1.655 trillion for the period of nine months last year increased to N1.723 trillion within the same period this year. However, loans and advances moved from N893.834 billion in 2011 to N964.871 billion in the first nine months this year.

In the case of Guaranty Trust Bank, it was a harvest time for the bank’s investors as its profit before tax moved from N49.348 billion in the first nine months of 2011 to N76.892 billion in the third quarter of the year, while its deposits from customers rose from N1.026 trillion in 2011 to N1.071 trillion in the first nine months of this year.

Skye Bank’s profit before tax for the first nine months of 2011 was N11.379 billion whereas the bank was able to declare a PBT of N16.549 billion, while its gross earnings for the third quarter of the year is N94.131 billion as against N59.658 billion in the same period of last year.
Another bank that showed a giant leap in terms of performance was the United Bank for Africa Plc. The bank, which posted a profit before tax of N34.219 billion for its third quarter last year was able to gross N44.859 billion in the same period of this year. Its total assets increased from N1.463 trillion to N1.637 trillion within the period under review. Its total deposits which hit N1.637 trillion in the third quarter of this year, is described as a reflection of the bank’s large pool of customers.

Diamond Bank posted a pretax profit of N 23.2 billion naira for the first nine months of the year, compared with a loss of N6.9 billion in the same period a year ago.

Ecobank Nigeria Plc increased its Profit After Tax for the Period from N19.109 billion in its Q3 2011 report to N24.087 billion in the same period of year 2012, indicating an increase in PAT of 26.1 percent while gross earnings for the period also increased from N155.895 billion in the Q3 of 2011 to N254.384 billion in the review period; representing an increase of 63.2%. Its dividend income grew from N185.731 billion in the Q3 of 2011 to N351.735 billion showing an appreciation of 89.4%.
On its part, Fidelity Bank made a total profit for the period of N13.050 billion compared to N6.009 billion in the Q3 of 2011 representing an increase in total profit of 117.2%.

PBT also increased to N16.319 billion in the Q3 of 2012 from N7.309 billion in the same period of 2011; indicating an increase of N123.3%.
Sterling Bank in its Q3 2012 report for the period ended September 30, 2012 recorded a profit after tax (PAT) of N4.493 billion compared to N2.743 billion in the corresponding period of 2011; indicating a growth of 63.8%.
PBT also increased from N3.012 billion in the Q3 of 2011 compared to N4.769 billion in the same period of 2012, showing an increase of 58.3% in the review period.
Meanwhile, National President, Nigeria Shareholders Solidarity Association, (NSSA), Mr. Timothy Adesiyan said although the local investors are happy with the performance of some of the banks, there is still need for the bank directors to factor the shareholder into the sharing formula adopted for the impressive gains recorded.

Adesiyan said experience has shown that directors of the banks earn various forms of fees and sitting allowance while the shareholders are usually paid pittance at the end of the day.

‘Recovery of Current Account Surplus Likely’

Despite the recent fall in the nation’s current account surplus in the second quarter of the year, financial experts have predicted a recovery when the figures for the second half of the year are made public.
A country’s current account is the sum of the balance of trade (i.e., net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.
According the official figures, the nation’s current account (CA) surplus fell to 4.5% of GDP in 2Q12, from 9.2% of GDP in 1Q12 (an upward revision from 7.8%).
However, the international financial advisory firm, Renaissance Capital, at the weekend expressed optimism on the possibility of the current account to grow when the figures for the second half of the year is ready.

Rencap said in a report titled: Nigeria: 2Q12 Current Account - Surplus Shrinks, recovery in 2H12 that “We expect the CA surplus to recover in 2H12 following its decline in 2Q12, but we expect this to be moderately tempered by the three-week oil shutdown in October. “We maintain our projection of an improvement in the CA surplus to 6.6% of GDP in 2012, from a downwardly revised 3.7% of GDP in 2011, by our estimates. On the back of this we expect FX reserves to exhibit stronger growth, particularly in 2H12, albeit at a softer rate in 4Q12.”
The firm projected a strong increase in foreign exchange reserves of over $10 billion in 2012, but said it is unlikely for government to meet its target of $50 billion by YE12.

“Compared with a year ago, the naira is stronger and more resilient, owing to a more robust external sector and higher reserves. We believe the strong naira will help to subdue imported inflation, and thereby mute the effect of the floods on food prices and distribution costs. The risk to our outlook is an increase in non-portfolio financial inflows (‘other investments,’ which are undefined and can be quite sizeable), which could weaken the accretion of FX reserves and undermine the naira,” the report authored by the firm’s sub-Saharan analyst, Yvonne Mhango said.

Rencap noted that the fall in oil prices was compounded by a decrease in oil export volumes in 2Q12, for the fourth consecutive quarter, of 2.6% YoY, saying the fall in the nation’s  2Q12 CA surplus was reflected in a slowdown in the build-up of FX reserves and the depreciation of the naira during the period. FX reserves only increased by $215million QoQ in 2Q12, compared with an increase of $2.56 billion in 1Q12, and the naira weakened by three percent against the dollar, to N162.8/$1.

Oil imports slow in 1H12. Following a twofold increase in 2010 and 32% growth in 2011, growth of oil imports slowed sharply to -1.0% YoY and 2.6% YoY in 1Q12 and 2Q12, respectively. The share of oil in total imports also dropped, to 32% in 2Q12, compared with 37% a year earlier.

The firm believed the slowdown is largely due to the increased scrutiny around payments to oil marketers, including demands for audits before payments are made. “We therefore expect oil’s share of the import bill to decrease in 2012, following its steady increase to 31% in 2011, from 23% in 2009 and 26% in 2010,” the report said.