Barring any unforeseen circumstance, Nigerian banks are poised to end the 2012 financial year on a high as consistent growth in both interest and non-interest income has continued to boost their earnings, findings by THISDAY have revealed.
Four years after the 2008 banking crisis, the Nigerian financial sector has continued to reap the benefits of the reforms that followed, with rapid growth in profitability and a significant decline in bad debt.
Also, asset quality has improved and capital and liquidity positions remained solid, despite heightened uncertainties in the external environment.
Experts believed that given the high margins recorded across their bottom-line, the first five banks might end the year with a combined profit of $6.4 billion (N1.01 trillion).
Furthermore, the five biggest banks in the country saw their growth doubled in the first half of this year. Their combined profits soared to $1.6 billion, four times the $400 million they achieved in 2005. For instance, the Nigeria’s fourth-largest bank by market value, Access Bank Plc’s first-half net income more than trebled to N26.3 billion ($165.09 million) from N8.05 billion ($50.53 million), while revenue doubled to N108.7 billion ($682.37 million).
The release of third-quarter results have also given investors encouraging news. For example, United Bank for Africa Plc’s unaudited results for the third quarter ended September 31, 2012 showed that its gross earnings grew to N168.2 billion ($1.05 billion) in the third quarter, up 21.4 per cent on N138.5bn ($869.44 million) in the same quarter of 2011. Total assets rose 11.1 per cent year-on-year to N1.95 trillion and profit before tax surged 376.25 per cent to N44.86 billion.
Analysts at Oxford Business Group (OBG) said the figures represented a turnaround after the prolonged effects of the 2008/09 crisis, when 10 banks accounting for 40 per cent of the system were signalled out by the Central Bank of Nigeria (CBN) for auditing and were subsequently sold off, nationalised or recapitalised.
According to the experts, “the crash came after several years of rapid growth that were fuelled by “margin lending” – banks’ lending to investors who then used the cash to buy the banks’ shares – and other soft and suspect lending deals.
“The clear-up is estimated to have cost $21.5 billion, including bailouts, forced mergers, the sacking of leading banking figures and the purchase of $11billion in Non-Performing Loans (NPLs) by the Asset Management Corporation of Nigeria (AMCON).”