The Nation Newspaper

Category: Equities

  • Emerging stocks fall to one month low

    Emerging-market stocks declined to a one-month low, led by industrial and technology companies, on concern that a slowdown in China will hamper global economic growth. Russia’s ruble bond yields increased to a record.

    The MSCI Emerging Markets Index retreated 1.2 per cent to 944.48 by mid day in New York, the lowest since February 10. The The Hang Seng China Enterprises Index (HSCEI) of mainland stocks listed in Hong Kong tumbled to an eight-month low and approached a bear market. Russia’s Micex Index sank 2.6 per cent, while yields on government bonds due February 2027 surged to the highest level since the securities were issued in February 2012. Dubai’s DFM General Index (DFMGI) led a rout in Persian Gulf equity benchmarks.

    Equities slumped on speculation a report today will show a slowdown in Chinese industrial output, after the biggest drop in exports since 2009. The data highlight the challenges for Premier Li Keqiang in achieving this year’s economic-growth target of 7.5 per cent. Ukraine warned Russia is amassing troops near its border as Prime Minister Arseniy Yatsenyuk visits Washington to step up the search for financial aid.

    “A lot of it is just slowing growth in China that appears to be driving emerging-market stocks on a daily basis,” Jack Ablin, who oversees $66 billion as chief investment officer at BMO Private Bank, told Bloomberg by phone from Chicago. “I would characterize emerging as cheap, but it’s not catching any momentum yet.”

    Today’s decline drove the MSCI Emerging Markets Index’s valuation to 10 times estimated earnings, compared with a multiple of 14.8 for developed nations, according to data compiled by Bloomberg.

    The iShares MSCI Emerging Markets Index exchange-traded fund fell 0.1 per cent to $38.77. The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.04 per centage point to 318 basis points, according to JPMorgan Chase & Co.

    Brazil’s Ibovespa (IBOV) declined, led by companies that rely on domestic consumption, after data showed Brazilian consumer prices increased more than forecast. Shorter-term swap rates dropped on speculation that the central bank will limit further increases in borrowing costs.

    Russia’s Micex Index (INDEXCF) dropped to the lowest level since May 2012, while the ruble weakened for a fourth day against the central bank’s dollar-euro basket. Government bonds due February 2027 slid for a fourth day, lifting the yield 40 basis points to 9.36 per cent.

    The Hang Seng China Enterprises Index, also known as the H-share index, slid 1.6 per cent, its lowest close since July 10. The measure has dropped 19 per cent from a Dec. 2 peak, nearing what some traders consider a bear market. Industrial output probably grew 9.5 per cent in February, compared with a 9.7 per cent increase the previous month, according to the median estimate of 47 economists surveyed by Bloomberg.

    Dubai’s DFM General Index retreated 3.8 per cent, the most since August 27. The measure, which has more than doubled in the past 12 months, fell below the 4,000-level for the first time in four weeks. Abu Dhabi’s benchmark gauge slumped 2.8 per cent, while Qatar’s index lost 1.4 per cent.

  • Honeywell appoints new CEO, directors

    Honeywell appoints new CEO, directors

    Honeywell Flour Mills Plc has appointed Mr. Lanre Jaiyeola as its new managing director with effect from April 1, 2014. This follows the formal retirement of the incumbent executive vice chairman and chief executive, Mr. Babatunde Odunayo on April 1, 2014. Odunayo, the pioneer chief executive, is retiring after 17 years of service with the company.

    Jaiyeola was formerly the commercial director at the company’s Ikeja Factory. He has been in the service of the company for more than 20 years with experience in finance, sales and manufacturing management.

    Also, the company has appointed Dr Albert Ozara as divisional managing director. Other appointments included Mr Rotimi Fadipe, who was appointed as executive director, supply chain and Mr Benson Evbuomwan, who has also been appointed as executive director, marketing.

     

  • SEC calls for inclusive financial access for women

    SEC calls for inclusive financial access for women

    Securities and Exchange Commission (SEC) has stressed the importance of financial access to women as a major catalyst for national development.

    Speaking during the SEC Learning Series’ programme in commemoration of the International Women Day, director general, Securities and Exchange Commission (SEC), Ms Arunma Oteh underscored the importance of financial literacy and saving and investment among women.

    She noted that the United Nation’s theme for this year’s celebration-”Inspiring Change” gives reason to be really proud of the great Nigerian women who have inspired change in the nation and have led various efforts for the country’s development

    According to her, SEC is determined to see women achieve economic empowerment but more importantly, it wants to celebrate the critical role of the woman in nurturing children and giving them the best of love and attention.

    She pointed out that women all over the world are faced with societal realities that threaten to limit their achievements and prevent them from attaining their economic potentials.

    “But of the many realities that women face, there is perhaps none as disenfranchising as poor access to finance. A recent study by the IFC showed that women-owned SMEs are particularly a financially undeserved segment. They are not only less likely to obtain formal financing; they also often get charged higher interest rates,” Oteh said.

    Citing a World Bank report on “Investment Climate in Nigeria”, she noted that about 76 per cent of women rely on informal sources of funds and savings in sharp contrast to only about one per cent that obtained capital from the formal sector.

    “Many other surveys have reported women being denied bank loans in high numbers. In addition to limited access to finance, women face discriminatory customary and other practices in inheriting land and property. In Nigeria, although women make up between 60 to 79 percent of rural workforce, they are five times less likely to own land than men,” Oteh noted.

    She pointed out that another reason for women’s economic exclusion is the disparities in earnings as in almost all parts of the world, women earn less than men.

    She said a study by the DFID revealed that when the incomes of men and women with the same educational levels were compared, women at every educational level earned at least 20 per cent less than their male counterparts and men with less education in some cases earn more than more educated female peers.

     

  • Equities lose N195b as average return declines to -5.75%

    Nigerian equities lost about N195 billion in market value last week as four-day successive decline overshadowed last-day recovery at the weekend. Most key indices at the Nigerian Stock Exchange (NSE) indicated widespread declines across sectors.

    The benchmark index at the stock market, the All Share Index (ASI), indicated a week-on-week decline of 1.53 per cent, pushing the average year-to-date return at the stock market to -5.75 per cent. ASI closed weekend at 38,952.47 points as against its index-on-the-board of 39,558.89 points for the week.

    Most value-based indices mirrored the overall market position. The NSE 30 Index, which tracks the 30 most capitalised companies, declined by 1.66 per cent to close the week at 1,748.25 points. The NSE Insurance Index indicated average loss of2.31 per cent within the insurance sector, closing at 143.28 points. The NSE Consumer Goods Index showed the worst decline with -4.67 per cent to close at 960.71 points. The NSE Lotus II Index, which serves as benchmark for ethical stocks, indicated a weekly loss of 1.79 per cent to close at 2,789.07 while the NSE-ASeM Index, which tracks stocks on the second board, declined by 0.30 per cent to close at 956.72 points.

    Meanwhile, banking stocks rode on the back of gains by Union Bank of Nigeria and Zenith Bank to record a marginal gain of 0.26 per cent. The NSE Banking Index closed the week higher at 385.45 points. The NSE Oil and Gas Index also rode on the back of Forte Oil to lead the contrarian groups with a week-on-week average gain of 1.37 per cent to close at 305.61 points. Forte Oil had led the gainers with a gain of N15.60 to close at N104. The NSE Industrial Goods Index also closed positive with a gain of 0.52 per cent to close at 2,582.16 points.

    With 54 losers to 32 gainers, aggregate market value of all quoted equities lost N195 billion to close the week at N12.512 trillion as against its week’s opening value of N12.707 trillion. A total of 198 stocks were traded during the week, with 112 stocks marinating their opening prices.

    Total turnover stood at of 2.15 billion shares worth N18.49 billion in 22,697 deals. Financial services sector led the activity chart with 1.72 billion shares valued at N11.15 billion in 12,303 deals, representing about 80 per cent of aggregate turnover volume. The conglomerates sector placed second with a turnover of 236.71 million shares worth N1.05 billion in 1,773 deals. Consumer goods sector followed with 52.82 million shares worth N3.50 billion in 3,664 deals.

    The trio of Wema Bank Plc, Transnational Corporation of Nigeria Plc and Zenith International Bank Plc were the most active accounting for 873.34 million shares worth N6.06 billion in 2,983 deals, about 41 per cent of aggregate turnover volume.

     

  • Access Bank promotes financial literacy

    Access Bank promotes financial literacy

    In commemoration of this year’s Global Money Week which commences today, Access Bank has designed week-long activities aimed at promoting financial literacy amongst youths and children in the country.

    Group head, inclusive banking, Access Bank, Ope Wemi-Jones said the Global Money Week presents another opportunity for the bank to affirm its commitment to the principles of inclusive and sustainable banking.

    According to her, the bank’s Early Savers Account for children encapsulates financial literacy and it is a value-based financial product that explores fun-filled and highly interactive financial literacy campaign to reach Nigerian children.

    The hallmark of this year’s commemorative initiatives by the bank will be the adoption of Command Secondary, Markurdi, Benue State for teaching of the financial literacy module. A representative of the bank will teach financial literacy modules to students of Command Secondary School, Markurdi, Benue on the third day of the Global Money Week celebration while students from not less 10 secondary schools across Lagos State will participate in the daily banking operations at the bank’s head office on subsequent days.

    Global Money Week is an annual global celebration that is organized and coordinated by Child and Youth Finance International (CYFI.) Activities are held worldwide to engage children in learning how money works, including saving, creating livelihoods, gaining employment, and entrepreneurship.

     

  • Capital market operators seek listing of oil companies on NSE

    Capital market operators have urged the Federal Government to implement a targeted measure that will encourage local participation in the oil and gas sector and ensure distribution of wealth from the sector to the wider Nigerian public through the stock market.

    Capital market operators, who spoke against the background of the low representation of the Nigerian economy by the capital market, said the sale of oil assets to Nigerians and provision of other incentives such as tax incentives would encourage companies to list their shares on the stock market.

    Several active operators in the Nigerian oil and gas sector including Afren Plc, Centrica, Eland Oil and Gas, Essar Energy, Heritage Oil, Lekoil Royal Dutch Shell, CAMAC Energy, Sasol, Mart Resources Inc and Mira Resources among others have primary listings outside Nigeria but are not listed on the Nigerian Stock Exchange (NSE). The assets values of these active companies are estimated at about $89 billion.

    Market operators said non-listing on the NSE denies Nigerian investors the opportunity to share in the profit made from Nigerian oil resource while simultaneously impinging on the economic development of the country. It is expected that assets divestment in the oil and gas sector would create between $4 billion and $5 billion in value in the next two years.

    Operators tasked the government to take some proactive steps that would forestall past mistakes of handing over virtually all oil assets to foreign companies to the detriment of indigenous investors.

    Managing director, Partnership Investment Company Plc, Mr. Victor Ogiemwonyi, said government should sell the oil and gas assets to Nigerians to create a general impetus for public participation.

    According to him, government should also require public companies with licences that serve larger public to list their shares on the NSE for public participation after a stated number of years.

    “Government should compulsorily make privatised companies especially to list a portion of their shares. Without these steps, the stock market will not grow as fast as we want,” Ogiemwonyi said.

    He added that government should give incentives such as lower tax rate to encourage listing on the stock market.

    Managing director, Crane Securities Limited, Mr. Mike Ezeh, noted that if the oil assets are sold to indigenous investors, the probability of their listing on the NSE would be very high.

    “As we expect further government and private divestments in the oil and gas sector, I believe indigenous firms should be given the opportunity to buy some of these assets. If this is done, the companies will be listed on the Nigerian bourse thereby deepening the capital market and sharing the profit among Nigerians,” Ezeh said.

    Executive vice chairman, Quantum Securities Limited, Andrew Elueni, had earlier called for a legislation that will goad the oil companies operating in Nigeria to list their shares on the NSE.

    “Imagine if 20 per cent of the assets of the likes of Shell, Chevron are listed, the capitalisation of Nigeria’s capital market will shoot up. Legislation should be applied,” Elueni said.

    However, an investment banker and financial analyst, Mr. Bayo Rotimi of Quest Advisory Services Limited, said preference should be given to incentives and enabling environment in the quest for new listings.

    According to him, new listings can only be achieved through the introduction of incentives such as tax rebates and waivers as well as a continuous commitment towards the enthronement of transparency and accountability in the running of the capital markets.

    “Bottom-line is that private sector entities cannot be forced to list. The capital market regulators must continue to engage these companies, seek to understand their apprehensions and roll out programmes and policies that address those concerns frontally,” Rotimi said.

     

     

  • Emerging stocks sustain rally

    Emerging-market stocks rose for a second day as United States of America (USA) and Russian diplomats prepared to meet to discuss Ukraine. The Standard & Poor’s 500 Index fluctuated amid weaker-than-forecast data on payrolls and services.

    The MSCI Emerging Markets Index gained 0.6 per cent to 956.19 after yesterday’s 1.6 per cent slump. Ukraine’s UX Index jumped 9.5 per cent, leading gains among 94 global equity gauges tracked by Bloomberg. The S&P 500 rose less than 0.1 per cent after reaching a record yesterday, while Russian shares extended losses. Spain’s two-year yield slid four basis points to 0.67 per cent, the lowest since Bloomberg starting tracking the data in 1993. The yen weakened 0.1 per cent to 102.32 per dollar. U.K. natural gas fell 1.1 percent, while crude lost 1.3 percent as United States (US) inventories climbed.

    Benchmark equity gauges in Turkey, South Korea and Taiwan gained at least 0.7 per cent. The MSCI All-Country World Index of developed and emerging-market stocks advanced 0.1 per cent, bringing its two-day gain to 1.4 per cent.

    Stocks rebounded on Tuesday after President Vladimir Putin said he reserved the right to use force to defend ethnic Russians in the Crimea while there’s “no such necessity” at present.

    “It’s been an impressively quick rebound from the sober tone that started the week,” Jim Reid, a strategist at Deutsche Bank AG in London, said in a report. “It’s still too early to give the all clear, and with Russian forces reportedly still very much in operational control of the Crimean peninsula we remain largely at the behest of headlines from the Ukraine.”

    Western officials are working to flesh out a combination of sanctions against Russia and financial incentives to enable Ukraine’s barely formed government to consolidate power over the economically crippled country of 45 million.

    Russia’s Micex (INDEXCF) slipped 0.4 per cent, paring earlier losses of as much as 1.9 percent and leaving the gauge 6.5 percent lower this week. The gauge rallied 5.3 per cent on Tuesday, its biggest one-day climb since May 2010. The ruble erased earlier declines against the dollar to trade little changed at 36.062.

    Qatar’s benchmark index slipped 2.1 per cent, the most since August, after three Persian Gulf nations withdrew ambassadors from the gas-rich kingdom perceived over its meddling in regional affairs. Gulf countries have been critical of Doha’s support for the Muslim Brotherhood.

    The S&P 500 was little changed after jumping 1.5 per cent on Tuesday, the most since December 18, to a record. The Institute for Supply Management’s non-manufacturing index fell to 51.6 in February from the prior month’s 54, the Tempe, Arizona-based group said. A gauge above 50 shows expansion. The median estimate in a Bloomberg survey of economists was 53.5. A purchasing managers’ index of services industries in the euro area expanded more than forecast.

    Investors have been speculating that recent weakness in data from housing to jobs was caused by inclement weather. The Labor Department will release its February jobs report on March 7. Economists estimate employers increased the pace of hiring to 150,000 workers after adding 113,000 in January, according to a Bloomberg survey.

    “Markets are continuing to give a free pass to any weak economic number because of the weather,” Jeffrey Kleintop, chief market strategist at LPL Financial LLC, which manages $414.7 billion, said by phone from Boston. “That could be the case for much of the data we’re going to get through February. Stocks will ignore the data if it’s bad and rally on the number if it’s good.”

    Investors have added $4.8 billion to US equity exchange-traded funds in the past five days and withdrawn $5.8 billion from bond ETFs, data compiled by Bloomberg show. Energy and real-estate stocks absorbed the most money among industry ETFs, with each taking in more than $700 million during the past week.

    Three rounds of Federal Reserve stimulus have helped push the S&P 500 up 177 per cent from a 12-year low, as US equities are set to enter the sixth year of a bull market that started March 9, 2009.

    The Stoxx Europe 600 Index was little changed after rallying 2.1 per cent on Tuesday. Trading was 35 percent greater than the 30-day average, data compiled by Bloomberg show. Subsea 7 SA dropped 7.8 percent after the offshore oil-services provider posted fourth-quarter profit that trailed analysts’ estimates. Carrefour SA climbed 4.3 percent after France’s largest retailer reported an increase in 2013 earnings and said it will boost spending this year.

  • Vitafoam records N280m profit in three months

    Vitafoam Nigeria Plc recorded marginal increases in sales and profitability in the first quarter as the foam-manufacturing company continued to struggled with high interest expense.

    Interim report and accounts of Vitafoam for the first quarter ended December 31, 2013 showed 1.6 per cent increase in sales while profit before tax rose slightly by 8.3 per cent. Profit after tax also inched up by 1.99 per cent.

    Turnover stood at N4.38 billion in December 2013 as against N4.31 billion recorded in comparable period of 2012. Profit before tax rose from N259.02 million to N280.47 million while profit after tax inched up to N180.43 million compared with N176.90 million in corresponding period of 2012.

    The first quarter report showed a familiar performance trend that has dogged the leading foam-manufacturing group in recent years, with sluggish sales and interest-suppressed bottom-line.

    Audited report and accounts of Vitafoam Nigeria for the year ended September 30, 2013 had indicated that sales rose by 12.8 per cent but pre and post tax profits dropped by 22.5 per cent and 18.2 per cent respectively. The largest growth on the profit and loss accounts remains finance expenses, which rose by about 40 per cent. With basic earnings per share dropping from 61 kobo to 50 kobo, the retention of the 30 kobo dividend payout cut dividend cover from 2.03 times to 1.67 times. This downtrend is also evident in the underlying returns and profitability of the company.

    Group’s total sales closed 2013 at N16.34 billion compared with N14.48 billion recorded in 2012. Cost of sales however rose by 16.4 per cent from N9.34 billion to N10.87 billion. Gross profit thus inched up by 6.3 per cent from N5.14 billion to N5.47 billion. Total operating expenses rose by 9.8 per cent to N4.34 billion as against N3.95 billion in previous year. Distribution cost had increased from N945.19 million in 2012 to N955.83 million in 2013 while administrative expenses rose from N3.0 billion to N3.38 billion. Non-core business income increased by 13 per cent from N146 million to N165 million. However, finance expenses jumped by 39.7 per cent to N661 million as against N473 million in previous year.

  • We have enough cash for investment, says Cadbury

    Cadbury Nigeria Plc has adequate cash flow to sustain continuous investments in its Nigerian operations over the immediate and medium term, the management of the confectionery giant has assured.

    The management of Cadbury Nigeria yesterday visited the Nigerian Stock Exchange (NSE) to further explain the reasons for the recent capital reduction exercise to the investing public.

    Managing director, Cadbury Nigeria Plc, Mr. Emil Moskofian, said the company is committed to continuous investment in its Nigerian business noting that the Cadbury Nigeria has demonstrated this commitment over its almost five decades of operations.

    According to him, Nigerian market, the largest in West Africa, is a very important market to Cadbury and it cherishes its long history and iconic brands.

    He explained that the decision on the recent capital reduction was taken because the company has surplus capital in excess of the current investment requirement and that should not be misconstrued as lack of appetite for the Nigerian market.

    He noted that the company has continued to surpass projections and the business is in good shape with good profit such that it can fund additional investments from its ongoing business.

    “We believe all the investments we want to do between two to five years we can fund them from our current business, there is no need for us at this point to dip into that surplus cash that we are sitting on, hence the reason we looked at what to do with that cash. We went through a number of options and decided to give the surplus cash back to shareholders. That does not suggest our lack of appetite for investing in this market,” Moskofian pointed out.

    He added that as part of the Mondelez International, the global snack powerhouse, Cadbury Nigeria has access to many global brands and innovation, which the Nigerian business could tap on to fuel its growth going forward.

    Cadbury Nigeria recently completed capital reduction exercise under which it returned excess capital of N11.9 billion to its shareholders by cancelling two out of every five ordinary shares held by the shareholders. Consequently, it reduced the share capital account by an amount equivalent to the par value of the cancelled shares and share premium accounts by about N11.27 billion. Also, each shareholder will receive returned capital per cancelled share at N9.50 per share.

     

  • What intrinsic values in First Bank’s expansion?

    Nigeria’s flagship bank, First Bank of Nigeria, is taking on the regional West African market with consummation of strategic acquisition that adds four countries to its footprints.

    FBN Holdings Plc, the holding company for First Bank of Nigeria Limited (FirstBank), accounts for some 12 per cent of the entire financial services sector. There are 56 financial services companies quoted on the Nigerian Stock Exchange (NSE) including 12 commercial deposit money banks, 29 insurance companies, two microfinance banks, four mortgage bankers and nine other financial services firms. The overall technical importance of First Bank is better appreciated within the context of the general market situation. At opening value today, FBN Holdings is bigger than each other sector and sub-sector on the NSE with the exception of its financial services sector, oil and gas sector, consumer goods and industrial goods sectors. Technically, FBN Holdings, on its own, holds significant influence on the overall market situation than several other individual sectors such as agriculture, construction, information and communication technology and healthcare among others. With capitalisation more than three times the size of entire populous insurance subsector, FirstBank’s pricing trend will exert more influence on overall market situation than the collective trend in several subsectors.

    Fundamentally, FirstBank is Nigeria’s largest bank. Interim report and accounts of FBN Holdings for the period ended September 30, 2013, which was based on the audited reports of major companies within the group, showed that gross earnings grew by 11.4 per cent to N290.8 billion in 2013 as against N261 billion recorded in corresponding period of 2012. Profit before tax stood at N70.1 billion compared with N75.7 billion in 2012. Profit after tax stood at N59.1 billion as against N64.3 billion.

    Key balance sheet items underlined the continuing expansion and penetration of the group with total assets of N3.7 trillion by September 2013, 14.6 per cent above N3.2 trillion recorded by December 2012. Total customer deposits rose by 16.6 per cent from N2.4 trillion in December 2012 to N2.8 trillion in September 2013. Also, total customer loans and advances stood at N1.6 trillion, an increase of 4.5 per cent on N1.5 trillion recorded by December 2012. With total assets of N3.7 trillion and customer deposits of N2.8 trillion, FirstBank ranks among the largest corporate and retail financial institutions in Sub-Saharan Africa.

     

    Diversified business base

     

    Beyond the technical and fundamental figures, the structures and operations of FBN Holdings and FirstBank lend credence to its leading position. The most diversified financial services group in Nigeria, FBN Holdings operates products and services across commercial banking, investment banking, insurance and microfinance business in seven countries including its primary market and head office- Lagos, London, Paris, Johannesburg, Beijing, Abu Dhabi, and Democratic Republic of Congo. While the group rests primarily on FirstBank, other subsidiaries include FBN Capital, a leading investment banking and asset management company; FBN Life Assurance, a life insurance business; and FBN Microfinance Bank, which offers microfinance services. With some 1.3 million shareholders, FBN Holdings has the largest shareholders’ base.

    The recent announcement of FirstBank’s expansion into West Africa through the acquisition of some of the operations of International Commercial Bank (ICB) marked a milestone in the expansion of Nigerian financial services companies within the sub-region and Africa generally. While African expansion has been at the forefront of Nigerian bankers’ strategies since mid 2000’s, FirstBank had cautiously concentrated on organic growth and consolidation of its domestic base. The strategy had worked out perfectly. While several Nigerian banks that had opened or acquired foreign operations in many African countries were either acquired or liquidated in the following financial and economic meltdown, FirstBank had further consolidated its leadership.

     

    Expanding from a

    position of strength

     

    So why has the bank now decided to spread its wings beyond the shores of Nigeria? According to the management of the bank, the acquisition of ICB operations in West Africa is the next stage of growth and provides a strong geographic and commercial base from which FirstBank can continue to grow progressively in Africa. With operations in Guinea, Gambia, Ghana and Sierra Leone, ICB provides FirstBank with a strong geographic platform for growth and an established customer base across the mid-corporate, small and medium enterprises (SME) and retail segments that complement the bank’s existing strategy in Nigeria. ICB has over 600 employees and 120,000 customer accounts spread across these four markets. ICB also operates in markets with major investments in key growth sectors on the continent, most notably the major mining industries that are prevalent in Guinea and Ghana and emerging in Sierra Leone as well as positioned for the commercial operations in the emerging oil and gas opportunities in Ghana and Guinea. It should be noted that FirstBank had in 2011 acquired BIC in the Democratic Republic of Congo, starting its progressive and case by case approach to inorganic growth opportunities. Since acquiring BIC, the bank has successfully managed an integration process that has incorporated BIC into FirstBank’s operations while delivering short term improvements in financial performance as well. This is the strategy that it will further deploy to harness and integrate the synergies and opportunities presented by the latest ICB acquisition.

    While many Nigerian banks are now actively expanding across the African continent and are implementing diverse business models as they seek to maximise growth, FirstBank’s approach customarily reflects its progressive approach. Its approach is rooted in the multi-local business model which ensures that the best of local culture and experience is mixed with the banking expertise the bank has built up over more than a century of operations. A multi-local business model is designed to ensure the markets where FirstBank is expanding retain the local culture and approach that make them an integral part of the local economy. By ensuring each FirstBank business across the continent adopts a locally led approach, while leveraging the international reach and experience of the parent company, the bank believes it can engender a long term sustainable approach to doing business in new markets, Africa in particular. “We are committed to developing a multi-local business model that broadens our geographic revenue base while providing enhanced service delivery to our new customers,” Group Managing Director, First Bank of Nigeria Limited, Mr. Bisi Onasanya reiterated on the confirmation of the acquisition of the ICB assets. According to him, the acquisition of ICBGFH assets in Ghana, Guinea, Gambia and Sierra Leone fulfilled the first stage of the bank’s ambitions to steadily build broader and more diverse footprints across Africa.

    The new acquisition would also strengthen FirstBank against increasingly tough domestic operating environment and secure new markets for stronger growth momentum. In its latest ‘Banking Industry Country Risk Assessment (BICRA)’ on Nigeria, Standards & Poor’s Ratings Services had outlined operating challenges confronting Nigerian banking industry amidst the lop-sided economic system and deficient infrastructure. “The Nigerian banking sector has undergone two major consolidation periods in the past 10 years. In our opinion, the second phase is close to an end, although the future of the three quasi-nationalized banks remains unclear. As the new industry landscape clears, we expect competition to increase and the sector to continue to organize itself into three distinct tiers. Most rated banks are in the upper and middle tiers. Positively, with 21 banks operating in the sector, we don’t believe there is any significant overcapacity because of inherently low leverage and retail penetration, as well as strong long-term economic growth fundamentals. We anticipate stiff competition, however, on at least two fronts: attracting low-cost retail deposits in a country with low banking penetration, and banking large corporates together with their staff, third-party suppliers, and distributors. We believe foreign banks will continue to attempt to enter the sector in 2013-2014, but barriers to entry remain high for banks without significant capital or scale,” the report outlined the industry stability outlook. Both the challenges and opportunities represent better prospects for FirstBank with its large domestic scale and built-up retail base as well as the new openings presented by the ICB acquisition.

    Onasanya said the ongoing domestic initiatives aimed at optimizing benefits of recent investments and countering pressures induced by regulatory changes would complement the bank’s expansionary drive to deliver greater earnings diversification and increase shareholders’ value through higher returns on equity among other benefits.

     

    Looking forward

     

    In the recent operational review, chief executive officer, FBN Holdings, Mallam Bello Maccido said the group has remained resilient in spite of the adverse impact of recent changes in regulatory policy on the banking industry, especially the increase in the minimum savings deposit rates as well as the removal of the Automated Teller Machine (ATM) withdrawal fee.

    According to him, in spite of the significant regulatory headwinds, the performance of the group has remained resilient as it continues to build its portfolio of businesses; expanding existing revenue streams and creating new lines of business such as mobile insurance and Bancassurance.

    He noted that the group further expanded into new geographies, particularly within the commercial banking business, where it sees significant opportunities.

    “In the coming year, we will expand the insurance business to include general insurance, evolving our insurance business into a composite one. In the medium term, we aim to increase the contribution of our non-bank businesses; working on fostering increased collaboration to exploit the strong natural synergies and cross-selling opportunities that exist between banking and the other financial services sectors we are active in with the aim of improving overall returns to shareholders,” Maccido said.