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Financial Services

Fitch says Nigerian banks have a risk indicator of 12.14, explains why

The report shows that Nigeria’s banking industry remains one of the most systematically fragile in the world.

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net interest income, Nigerian Banks, Fitch, Nigerian banks tremble over Cyber attack, Most Nigerian banks are very likely to fail stress tests should the economic downturn persists and deepens, What Banks can do to improve Real Sector Lending in 2021

A new report by Fitch Solutions titled “Nigeria: Banking & Financial Services Report Q3 2020” has revealed that the Banking Industry Risk Indicator (BIRI) in Nigeria stands at a score of 12.14 out of 100.

According to the report, the 12.14 BIRI score is indicative of high risk due to weak economic growth dating back to the 2016 recession. Other factors responsible for the poor score include declining oil revenue, an unfavourable regulatory environment, and a generally poor standard of living of most Nigerians.

The poor BIRI score also demonstrates that the Nigerian banking sector is still one of the “most systematically fragile” out of all the other banking sectors that were sampled in the report. Fitch Solutions also noted that this situation poses significant risks to Nigeria’s macro-financial stability. Part of the report said:

“Nigeria’s BIRI scores show that its banking sector remains one of the most systematically fragile of the 121 banking sectors that we assess as part of our BIRI universe, posing significant risks to macro-financial stability in the country. The structural backdrop of the banking sector has improved somewhat, with the BIRI having risen from 0.00 in Q417 to 12.14 in Q120. However, the latest score remains below the historical average of 21.72. Nigeria currently sits at 117th place out of the 121 countries that are captured in our rankings.”

READ MORE: AfCFTA: Nigeria’s financial footprints to be extended across Africa – Osinbajo 

Meanwhile, despite the poor BIRI score and an expected setback in 2020 due to COVID-19, the report noted that there is a bright future ahead for the Nigerian banking industry. According to the report, there will be a total banking asset growth of 5.3% to N41.9 trillion in 2020. In the medium term, Fitch Solutions forecasts a 10.9% growth to N56.9 trillion.

Nigeria’s top five banks — First Bank, UBA, GTBank, Access Bank, and Zenith Bank (FUGAZ) — are also expected to remain financially sound. Note that these banks account for half of Nigeria’s banking sector assets.

READ ALSO: Nigeria’s top 10 agricultural exports attract N206.16 billion in 9-month

Note, however, that the anticipated recovery in the banking sector is highly dependent on how quickly the Nigerian economy begins to recover latest by Q4 2020. And even though mergers in the

“Our outlook for the growth of the Nigerian banking and financial services sector over the coming years – aside from a temporary slowdown in 2020 – is brightening as strengthening financial services sector regulations and softening liquidity constraints ensure that the sector as a whole remains stable. Despite significant pressure from non-performing loans since 2016, the systemically important top five banks, which together account for more than half of total banking sector assets, are financially sound, and we expect a broad continuation of sector rebalancing in line with the economic recovery, provided the economy begins to recover in Q420, in line with our central forecast.

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“Consolidation through mergers is working to create the potential for financially stronger banks that can meet stricter capital adequacy requirements. On the downside, high inflation, lower oil prices and the expected economic contraction due to the effects of Covid-19 at a time when trade relations between the US and China continue to deteriorate sharply, will be a headwind to Nigerian banking and financial services sector development in the near term.”

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Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Financial Services

Jim Ovia is set to earn N9.58 billion in dividend for FY 2020

The highly revered banker is the single majority shareholder of Zenith Bank as he directly owns 3,546,199,395 units of the fast-rising bank stock.

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Jim Ovia: From a clerk to founder of Nigeria's most profitable bank

The founder and Chairman of Zenith Bank Plc, Mr. Jim Ovia is expected to earn a massive sum of N9.575 billion in dividend for the financial year ended December 2020

The highly revered banker is the single majority shareholder of Zenith Bank as he directly owns 3,546,199,395 units of the fast-rising bank stock out of the 31,396,493,787 ordinary shares available. This gives him an 11.29% direct interest in the Tier -1 bank.

It’s however important to note that such dividend is subject to a 10% withholding tax in Nigeria.

READ: Is Zenith Bank thriving on the strength of sound financial indices?

Recall that about a day ago, the Board of Directors of the bank in a statement released via the Nigerian Stock Exchange proposed a final dividend of N2.70, amounting to a total payout of N3.00 per share for the financial year 2020 (interim: N0.30).

This proposal reflects the past year’s robust performance and appears to signal that Zenith bank remains well-positioned to perform in the current financial year. However, there was a lower payout ratio at 40.9% compared to FY’19 (42.1%).

  • Key earnings drivers to the financial year performance under review were a 90 basis points drop in the cost of funds to 2.1%, which propelled net interest income (+12.2% YoY) and a 3.8x jump in revaluation gains to N43.4 billion.
  • These offset pressures from operating costs (the cost to income ratio rose 1.2ppts to 50.0%) and impairment charges (cost of risk rose 40basis points to 1.5%)

READ: Jim Ovia: From a clerk to founder of Nigeria’s most profitable bank

Described as the ‘Godfather of banking in Nigeria’ by Forbes Africa, Jim Ovia is quite popular for his business dexterity and leadership skills, especially in the banking sector.

His early interest in technology was the reason Zenith Bank became the first Nigerian company to have a functional website in 1995 and was able to smoothly migrate its operations from analog times to a digital era.

From a single branch in a residential building, Zenith Bank now has hundreds of branches all over Nigeria and several subsidiaries in other countries. The bank became a Public Limited Company in 2001 and was listed on the Nigeria Stock Exchange (NSE), and later on the London Stock Exchange (LSE).

On the 27th of April 2007, Zenith Bank Plc became the first Nigerian bank in 25 years to be licensed by the UK Financial Services Authority (FSA), giving rise to Zenith Bank UK Limited.

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Financial Services

Zenith Bank declares final dividend of N84.8 billion for shareholders

Zenith Bank declares final dividend of N84.8 billion for shareholders for 2020.

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Zenith Bank Plc

The Board of Directors of Zenith Bank Plc has announced the payment of a final dividend of N2.70 for every share of 50k held by shareholders, amounting to a total of N84.8 billion for the year ended 2020.

This is according to a disclosure signed by the company’s secretary, Michael Osilama Etu and sent to the Nigerian Stock Exchange.

According to the notification, the final dividend will be paid electronically to shareholders on the 16th of March, 2021, subject to appropriate withholding tax and approval from the Company’s Annual General Meeting. Other pre-requisite conditions for payment are;

  • Only shareholders whose names appear in the registrar of members as at the close of business on 8th of March, 2021 will be considered.
  • Shareholders must have completed the e-dividend registration and must have mandated the Registrar (Veritas Registrar Limited) to pay their dividends directly into their bank accounts.
  • In lieu of this, it is pertinent to note that the register of shareholders will be closed on 9th of March, 2021.

Zenith Bank Plc had earlier paid an interim dividend of 30k to its qualified shareholders on 22nd of September, 2020, thereby raising the total dividend declared by the financial giant in 2020 to N3.00, indicating an increase of about 7.1% when compared to the total dividend of N2.80 declared in 2019.

What you should know

  • Zenith Bank reported a profit before tax of N255.9 billion for FY 2020, indicating a growth of 5.2% YoY
  • It also posted a Profit After Tax figures of N230.6 billion for the period under review, indicating a growth of 10.4% YoY.
  • It has total shares outstanding of 31,396,493,787 and officially closed trading today with a share price of N26.

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