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Insurance companies plead for extension of December 31, 2020 recapitalization deadline

Insurance companies have appealed to NAICOM to extend the deadline for recapitalization as directed by the regulator.

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NAICOM

Insurance operators are clamouring for the extension of the recapitalization deadline to December 31, 2020 from September 30, 2021.

They also want waived, the first phase of its segmented recapitalization for the insurance and reinsurance companies scheduled to end December 31, 2020, as directed by the regulator, the National Insurance Commission (NAICOM).

The reasons given by the operators for the extension of the deadline are proximately related to the huge impacts of the COVID-19 pandemic and #EndSARS protests on their insurance businesses.

Thus, they require enough time to fully settle back to their businesses to be able to pursue more aggressive recapitalization agenda to meet the commission’s set objectives by 31 December, 2020.

The insurance companies are as well pleading with NAICOM to jettison the phase by phase segmentation of the exercise – with the first phase billed to elapse on December 31, 2020.

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This plea was made during a meeting of the Chief Executives of all the insurance companies with the Commissioner for insurance at the industry’s professional forum in Abeokuta, Ogun State recently.

The operators are more concerned and agitated, as it relates to meeting certain thresholds by 31 December 2020, and failing to meet them would make the commission restrict the scope of business insurance and reinsurance companies they can transact.

In consideration of the economic realities, a number of the operators are even appealing to the commission to waive/step down the December 2020 deadline, to have ample time to rejig and revamp their businesses.

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What you should know

  • Life and general insurance companies were asked to shore up their existing minimum paid-up capital from N2bn and N3bn to N4bn and N5bn respectively by the end of December 2020, and meet the final minimum paid-up capital requirements of N8bn and N10bn respectively by the end of September 2021.
  • Composite companies and reinsurance firms were asked to shore up from existing minimum paid-up capital of N5bn and N10bn to N9bn and N12bn by end of December 2020 and to N18bn and N20bn respectively by the end of September 2021.
  • NAICOM extended the deadline for insurance and reinsurance companies to meet its new capital requirements to September 30, 2021 from December 31, 2020.
  • NAICOM also mandated that 50 per cent of the minimum paid-up capital for insurance and 60 per cent for reinsurance must be met by 31 December 2020.
  • NAICOM stated that insurance companies that failed to satisfy the required minimum paid-up capital by December 31, 2020 may be restricted on the scope of business they would transact.
  • Nairametrics had reported that some insurance companies have been struggling to meet these requirements. There were also wide-spread speculations over possible mergers/acquisitions in the insurance sector.

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Financial Services

Despite CRR debits, Nigerian Banks record higher net interest income

Banks are recording higher net interest income, despite the CBN’s frequent CRR debits chalking off significant amounts of their cash.

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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

Some of the top banks in Nigeria posted a total net interest income of N403 billion in the third quarter of 2020 compared to N369.5 billion in the same period in 2019.

In the first 9 months to date, the banks have reported a combined net interest income of N1.2 trillion compared to N1.1 trillion same period last year.

READ: Aviation: Nigerian ground handling firms count revenue losses due to pandemic-induced plunge

Nairametrics collated these figures from the following banks, FBNH, UBA, GT Bank, Access Bank, Zenith Bank, Fidelity Bank, Stanbic IBTC, Sterling Bank, and Union Bank. The banks recently released their third-quarter interim results.

Deposit money banks have complained bitterly over the central bank’s frequent CRR debits chalking off significant amounts of cash that they could have earned on.

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READ: Union Bank releases Q1 2020 result, records 14% profit increase

A Nairametrics report indicates banks suffered CRR debits of over N1.9 trillion in the second quarter of 2020, taking the total amount of customer deposits held by the CBN at about N6.5 trillion.

The figure is likely higher now as more CRR debits have occurred in the third quarter of the year. Nairametrics reported banks were debited N226 billion CRR debit in a recent update provided by reliable sources.

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However, as the above report indicates, the banks still earned more this year compared to 2020. Where banks may have suffered dips is in net interest margin, a measure of the percentage of income banks earn after netting off the cost of funds.

READ: Nigerian Banks issue N3.3 trillion in new loans in June 2020

However, this has also been largely mitigated by low deposit rates even as banks maintain most of their lending rates.

Despite the rise in net interest income for the collection of banks under our review, some banks individually faired worse in 2020 compared to 2019. FBNH, Stanbic IBTC, and Access Bank all recorded lower net interest income in the first 9 months of 2020 compared to the same period in 2019. Significant gains over the prior year were however recorded with the other banks.

READ: Access Bank Plc posts N102.3 billion profit in 9M 2020, up by 15.7% YoY

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What is driving Margins

Banks are recording higher net interest income largely because interest rates on deposits are at near-record lows.

Stanbic IBTC

This drive down in the cost of funds helps boost the income of banks because they are also yet to significantly drop their lending rates.

In the first 9 months of the year, the banks reported total loans and advances of N1.6 trillion, 14% higher than the N1.4 trillion reported at the end of 2019.

READ: FBN Holdings Plc posts Profit of N21.9 billion in Q3 2020

Banks have also reported generally improved pre-tax earnings, posting a combined N737 billion in the first 9 months of 20120 compared to N723 billion in the same period last year.

The better than expected results has triggered a boost to their share price. Banks have also seen their share price rally in recent weeks as investors finally recognize their low valuations amidst strong earnings.

The Banking sector index is up 14.72% year to date and only fell last week after investors embarked on cashing out their profits.

Explore Data on the Nairametrics Research Website

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Financial Services

AXA Mansard Insurance Plc set to raise company’s share capital to N18 billion

AXA Mansard Insurance Plc. has announced its plans to embark on a share consolidation and issuance of bonus shares exercise.

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AXA Mansard Insurance Plc

AXA Mansard Insurance Plc. has announced its plans to embark on a share consolidation and issuance of bonus shares exercise required to take the company’s share capital to N18 billion.

This announcement is contained in a notice, signed by the firm’s Secretary, Mrs. Omowunmi Mabel Adewusi and sent to the Nigerian Stock Exchange market, as seen by Nairametrics.

What you should know

The corporate decision is part of the resolutions of the Board of Directors of AXA Mansard Insurance Plc. subject to shareholders’ approval and other regulatory requirements.

Some key highlights of the notice are:

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  • That the Management of the Company is set to carry out the share consolidation and issuance of bonus shares exercise required to take the Company’s share capital to N18billion.
  • That the bonus issue exercise may be done at once or in phases, provided the Company meets the September 30, 2021 deadline set by the Commission.
  • That subject to regulatory approvals, the Company would hold an Extra Ordinary General Meeting to obtain shareholders’ approval of the Share consolidation and Bonus Share
  • That the Board and Management be and are hereby authorized to appoint such advisers, professionals, and parties that they deem necessary, upon such terms and conditions that the Directors may deem appropriate with regard to the aforementioned Share Consolidation and Bonus Issue Exercise.
  • That the Board of Directors be and are hereby authorized to take all steps and do all acts that they deem necessary for the successful implementation of the above stated resolutions.

Why it matters

The corporate action is a deliberate and strategic way of meeting up with the new and revised minimum paid up share capital requirements for composite firms, which is currently pegged at N18 billion.

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Financial Services

CRR Compliance: Banks suffer another N226 billion in CRR debits

Nigeria banks have had their vaults debited of N226 billion by the Central Bank of Nigeria in the apex bank’s latest CRR sequesters.

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CRR debits, P-AADS, #EndSARS: CBN says funds in frozen accounts may be linked to terrorist activities, Covid-19: Court closures impacted revenue generation for courts - Emefiele, P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638., CBN expands access to mortgage financing

Deposit Money Banks (DMBs) have collectively suffered a debit of N226 billion in compliance with the Cash Reserve Requirements (CRR) fixed by the CBN.

According to a reliable source, the debit occurred in the week ended November 20, 2020. This follows a whopping N917.5 billion debit recorded a month ago as reported by Nairametrics. The central bank imposed CRR sequesters on banks that fail to meet its minimum lending targets as a percentage of deposits.

READ: Nigerian economy slips into recession as GDP contracts by 3.62% in Q3 2020

In its September monetary policy communique, the bank claimed its policy measures have led to increased lending in the economy emphasizing the need to double down on it.

“The Differentiated Cash Reserves Requirement (DCRR) and the minimum Loan-to-Deposit Ratio (LDR), have ensured a significant stream of credit to the real economy. As at end-August 2020, aggregate bank credit had risen by about N3.7 trillion relative to its level in May 2019, when the LDR policy was introduced. The outlook for credit to the economy remains positive given that these policies are still in place and, importantly, that the banking industry continues to be resilient.”

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READ: Africa’s internet economy has the potential to reach 5.2% of the continent’s GDP by 2025 – Goggle/IFC

READ: Crypto: Alpha Finance gains 400% in 10 days, supported by a big bank

                                            Source: Nairalytics Research

READ: Banks guaranteed N3.6 billion loans to farmers under the ACGSF – CBN

What you should know

  • Out of the N226 billion debited for November 2020; top five (5) banks in Nigeria – FUGAZ, bore the biggest brunt, with a combined debit of N137.5 billion, implying that the top 5 banks accounted for 60.8% of the total debit for this month.
  • The break down of the debit for the top five banks are; GT Bank (N59.5 billion), Zenith Bank (N30 billion), FBN (N20 billion), Access (N18 billion), and UBA (N10 billion).
  • Nairametrics had earlier reported that CBN increased the CRR in January by 5% to 27.5% to address monetary-induced inflation, whilst retaining the benefits from the CBN’s LDR policy.
  • Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

READ: FUGAZ Banks suffer N1.9 trillion in CRR Debits in Q2

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