Obinna Chima and Nume Horsfall
Following an anticipated decline in yields on fixed income instruments, Meristem Securities Limited has predicted increased lending by banks this year.
Head, Research and Investment, Meristem, Mr. Taiwo Yusuf, made this forecast, while presenting the Investment Bank’s “Outlook 2013: Nigerian Economy and Financial Markets,” to journalists in Lagos Tuesday.
On his part, Group Managing Director/Chief Executive Officer, Meristem, Mr. Oluwole Abegunde, argued that with the reforms in the sector, banking stocks would continue to drive growth on the Nigerian Stock Exchange (NSE).
Yusuf also anticipated drop in yields on fixed income instruments from 18 per cent, to about 12 per cent this year. This, he argued may lower banks’ appetite for fixed income securities.
He also predicted that the country’s forex reserves would climb to $53 billion by the end of the year, just as he forecast that the naira would trade within the rage of N155.45/$1-N160.95/$1 this year.
He explained: “For the banking industry, their earnings growth in 2012 was close to 90 per cent, but this is likely not going to happen in 2013. That happened in 2012 because yields were high and they had asset mix which favoured fixed income instruments.
“Their loan growth was just about five per cent for most of them. But in 2013, it is likely going to change. Yields are likely not going to be attractive again as banks are likely going to increase their allocation to loans.”
Continuing, Abegunde urged stock market investors to consider investing in the financial service sector.
“Post consolidation, we have a better financial service sector in Nigeria. The regulators have done a good job in cleaning up the financial sector. The banks now have better risk management process, their assets quality has gone up. In fact, in 2013, we are expecting a number of banks to return as much as N100 billion in profit before tax for the year ended 31st December 2012.
“We also think that the insurance companies, the PFAs would also play actively in the market. We are going to start seeing significant improvement in the valuation of insurance companies because the National Insurance Commission (NAICOM) has done a lot of work,” the Meristem boss added.