Connect with us
nairametrics

Financial Services

Banks’ stakeholders express 4 main concerns bothering the sector right now

Banks are more concerned about the arbitrary nature and lack of understanding of the CRR debits.

Published

on

Banks' stakeholders express 4 main concerns bothering the sector right now, CBN, MARKET UPDATE: CBN’s historic agriculture lending; Is it yielding the desired results? 

Stakeholders in the Nigerian banking sector have raised concerns over four main issues that are threatening their investments at the moment.

These concerns range from the perceived “unorthodox monetary policy” moves of the apex bank, to FX liquidity issues, and of course the negative impacts of the COVID-19 pandemic.

These concerns were raised by the representative of some of the country’s top banks (Zenith Bank Plc, FBN Holdings Plc, United Bank for Africa Plc, Guaranty Trust Bank Plc, and Stanbic IBTC Holdings Plc) who recently attended Standard Chartered Bank’s 2020 Africa Investor’s Conference.

READ MORE: Bank Hold-Cos are expected to fare better in new era of Nigerian banking

Focus on the issues raised

According to an executive summary of the conference which was made available to Nairametrics, banks’ stakeholders are especially worried about the following:

GTBank 728 x 90
  • The negative impacts of CBN’s constant CRR debits.
  • The issue of naira’s liquidity management.
  • They are also worried about FX liquidity (or the lack thereof), as well as the exchange rate unification at CBN’s different windows. When will the CBN resume dollar sales to foreign portfolio investors in the I&E window?
  • Lastly, banks’ stakeholders are worried about COVID-19 and its impacts on earnings outlook, loan restructuring, and asset quality.

Part of the document containing the executive summary of the conference said:

“Banks are more concerned about the arbitrary nature and lack of understanding of the CRR debits as it makes it difficult for them to plan. Most are increasing steps to reduce balances with the CBN to limit debits.  According to the CBN, CRR balances with the CBN currently stand at N10tn, 22% of sector assets and 50% of sector deposits. This is negative for NIMs, but funding costs have also declined, dampening the impact. Most of the banks have presented loans to the CBN for restructuring but are still engaging with clients. According to the CBN, loans presented by the sector for restructuring account for 32.9% of total loans, implying an overall weakness in sector asset quality, which we will likely not see in asset quality deterioration by FY20e given the regulatory forbearance.

“Sector NPL ratio currently stands at 6.6% vs. 11% in April 2019. Banks continue to maintain their position of following strict credit processes to drive credit growth, and not grow loans aggressively due to pressure from the loan-to-deposit ratio (LDR) minimum lending policy of the regulator.

Coronation ads

“The improvement in oil prices has also reduced the concerns of asset quality deterioration in oil and gas exposure. Obligors in the sector have a breakeven cost price at the USD30/bbl level. Some banks expect further devaluation in the currency at the official window, given the depressed FX revenue outlook from
lower oil prices, but acknowledge the backward integration drive of government to improve corporates’ sourcing of raw materials locally to reduce pressure on FX due to imports.”

Download the Nairametrics News App

Recall that there have been different reports and forecasts about the recent negative pressures on Nigerian banks and how their earnings/profitability might take a hit. And this is probably the first time these banks are acknowledging and speaking up about these changes. It is unclear, at this point, what the CBN might do to remedy some of the concerns raised.

In the meantime, you may download the full report containing the key takeaways from the conference by clicking here.

Jaiz bank ads

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.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Financial Services

Conventional insurance firms can now set up their Microinsurance department – NAICOM

NAICOM has issued a circular allowing conventional insurance companies in Nigeria to exploit the huge opportunities in the Microinsurance window.

Published

on

NAICOM

The National Insurance Commission (NAICOM) has issued a circular (NAICOM/DPR/CIR/32/2020) allowing conventional insurance companies in Nigeria to exploit the huge opportunities in the Microinsurance window.

The circular was signed by Akah L M, Director (Policy & Regulations), and disclosed that the requirements for the conventional insurance firms to be granted approval for the window operation includes:

  • The insurer shall seek and obtain approval of the Commission to transact microinsurance business.
  • Board resolution approving the establishment of a microinsurance department.
  • Applicant shall apply for window microinsurance national operation licence.
  • The department shall be headed by an experienced Insurance Officer, not below the rank of an AGM.
  • The Insurance Officer must possess a minimum of 7 years post Associate of Chartered Insurance Institute of Nigeria qualification or a minimum of 10 years working experience in a technical department of an insurance institution.
  • Any window operator shall segregate the financial records of its microinsurance business from that of the conventional business.
  • Appropriate reinsurance arrangement shall be put in place.

(READ MORE: NAICOM gives insurance companies additional one year to recapitalise)

What this means

  • The microinsurance window presents a gold mine waiting to be tapped by the conventional insurance firms in Nigeria, helping them to achieve critical mass in the market.
  • This would afford opportunities for those in informal sectors, as well as low-income people and households to enjoy insurance products and services that will protect them against unexpected events, that could threaten their livelihood and businesses.

Continue Reading

Financial Services

CBN introduces “Special Bills” as part of efforts to control money supply in the economy

The Central Bank of Nigeria has announced the introduction of a Special Bill with unique features.

Published

on

CBN Gov Godiwn Emefiele

Nigeria central bank has announced the introduction of what it calls the “Nigeria Special Bills” in what it claims is an effort to deepen the financial markets.

The apex bank also claims the instrument avails it with an additional liquidity management tool for Nigeria’s financial system.

In a disclosure, signed by the Director of Banking Supervision of CBN, Bello Hassan, and seen by Nairametrics, it said the Special Bills contained the following features

READ: CBN Governor alleges parallel market used for bribes and corruption

  1. It has a Tenor of 90 days
  2. It comes with Zero coupon, as the applicable yield at issuance will be determined by the CBN.
  3. The instrument will be tradable amongst banks, retail and institutional investors.
  4. The instrument shall not be accepted for repurchase agreement transactions with the CBN and shall not be discountable at the CBN window.
  5. The instrument will qualify as liquid assets in the computation of liquidity ratio for deposit money banks.

The central bank, yanked off retail and instituional investors from accessing the highly lucrative Open Market Operations bills where yields were previously high. It is unclear if this bills will replace the OMO bills or is permamnent.

GTBank 728 x 90

READ: Frantic CBN allows diaspora remittances to be withdrawn in dollars and sold anywhere including black market

What this means: With the introduction of the new Special Bills, the CBN aims to securitize the excess Cash Reserve Requirement balances of local banks by offering them short-dated zero-coupon special bills.

  • Since May 2020, the central bank has sequestered over N6 trillion as part of its CRR debits of the accounts of deposit banks.
  • Nigeria’s central bank expects commercial banks to maintain a loan to deposit ratio of 65% and thus debits the accounts of commercial banks who do not meet this target for excess deposits.
  • According to Nairametrica analysts, this new bill provides the banks with an instrument which they can offer to investors in exchange for a return. For example, the banks can sell the “Special Bills” to investors who need fixed income instrument.

Why it matters: The claims the Special Bills is in line with the “CBN’s goal of ensuring optimal regulation of systemic liquidity and promoting efficient financial markets in support of economic recovery and sustained growth,” however Nairametrics undertands there could be more to this.

Coronation ads

However, Nairametrics believes pressure from the banks who have complained about the frequent debits may have resulted in this new Special Bills. In some of the earnings calls listened into by Nairametrics, banks have often cited the drop in their interest income and margins.

READ: Bankers’ Committee embarks on cybersecurity & fraud awareness initiative, launches Moni Sense campaign

What they are saying: A part of the recent CBN disclosure read thus: “The Central Bank of Nigeria (CBN) hereby announces the introduction of Special Bills as part of efforts to deepen the financial markets and avail the monetary authority with an additional liquidity management tool.”

What to expect: The CBN is expected to further clarify the issue and pricing of the recent instrument in coming days.

Jaiz bank ads
Continue Reading

Financial Services

Fidelity Bank MD/CEO purchases 5 million additional shares worth N12.97 million

The MD/CEO Designate of Fidelity Bank Nigeria Plc has purchased an additional five million units of the bank’s shares.

Published

on

Fidelity Bank M.D purchases 5 million additional shares worth N12.97 million

The Managing Director/CEO Designate of Fidelity Bank Nigeria Plc, Mrs. Nneka Onyeali-Ikpe has purchased an additional five million units of the bank’s shares totalling N12.97million.

This is according to a notification, signed by the bank’s Secretary, Mr. Ezinwa Unuigboje, and sent to the Nigerian Stock Exchange Market yesterday, as seen by Nairametrics.

What you should know

The breakdown of the disclosure showed that the transaction took place in five tranches with an average share price of N2.56.

  • First tranche: 260,190 units of the bank’s share were bought at N2.52 each, amounting to N655,678.8
  • Second tranche: 400,000 units of the bank’s share were bought at N2.55 each, amounting to N1.02million.
  • Third tranche: 130,000 units of the bank’s share were bought at N2.58 each, amounting to N335,400.
  • Fourth tranche: 2,870,000 units of the bank’s share were bought at N2.60, amounting to N7.46million.
  • Fifth tranche: 1,339,810 units of the bank’s share were bought at N2.56, amounting to N3.43million.

(READ MORE: Fidelity Bank slashes growth forecast, readies Eurobond coupon ahead of due date)

GTBank 728 x 90

In summary, the total transactions incurred by the MD in buying 5 million additional shares grossed N12.97million.

What this means

The recent corporate action indicates growing optimism in the bank’s future and potentials, which could be a pull factor to other investors.

Coronation ads

Continue Reading