The Nation Newspaper

Category: Money

  • Dispute Resolution Bill threatens FDI inflow, says body

    The $7 billion annual inflow from foreign direct investment (FDI) will be grossly affected should the National Assembly pass the National Alternative Dispute Resolution Regulatory Commission Bill, 2011, President, Maritime Arbitrators Association of Nigeria, Gbola Akinola has said.

    Majority of the foreign investors are targeting the Nigerian bond market where there is sovereign guarantee and improved returns compared with other developed countries. There has also been a strong portfolio inflow to the high yields on local-currency debt including the 91-day Treasury bill, which was 14 to 15 per cent interest rate per annum.

    The Bill, when passed, is expected to remove customers’ power to get attorney where there are disagreements in the course of their businesses.

    Briefing journalists at the weekend over the Bill already passed at the House of Representatives, Mr. Akinola said the Bill portends risk for business owners and will deter foreign investors from further investment. He said the Bill, now at an advanced stage at the Upper House, is not in the interest of the Nigerians and the economy.

    “Investors will want to know that they can get legal help if need arises in the course of their businesses in the country. Business partners have the right to determine how they want their cases to be treated instead of limiting access to justice to National Alternative Dispute Resolution Regulatory Commission,” he said.

    Chairman, Nigeria Bar Association, Section on Business Law Committee on Arbitration, Olasupo Shasore, said the group will raise a legal team that will challenge passage of the Bill in court.

    He said that private dispute resolution market contributes to economic growth of the nation, adding that the operators are respected globally.

    “There is no legal and practical reason the Bill should be passed. We are engaging with our representatives at the National Assembly to ensure that the Bill is not passed the way it is. We have also announced a legal team that will challenge the passage of the Bill. We do not think there is need to set up a new Bill to regulate the industry,” he said.

    Shasore said people should be allowed to select their own dispute resolvers instead of relying on the government agency.

     

  • ‘Electronic funds transfers to hit N160b daily’

    The second phase of the cash-less policy billed to commence in July may raise the value of electronic funds transfer in the country to N160 billion per day by the end of this year, the Chief Executive Officer, Electronic Payment Providers Association of Nigeria (E-PPAN), Mrs. Onajite Regha, has said.

    Additional states coming on board for the next phase of the cash-less policy are the Federal Capital Territory, Abia, Rivers, Anambra, Kano and Ogun states.

    The E-PPAN boss, who spoke in Lagos, said the current value of electronic fund transfers – put at N80 billion per day by the Central Bank of Nigeria (CBN), would most likely double because there would be a lot of changes, which would compel people to use e-Fund transfer channels.

    The Nigeria Interbank Settlement System (NIBSS) is handling transactions worth about N20 billion daily, while the Nigeria Electronic Funds Transfer is conducting about N60bn worth of transactions daily.

    NIBSS provides the infrastructure for automated processing, settlement of payments and fund transfer instructions between banks, discount houses and card companies in Nigeria. It is owned equally by all licensed banks in Nigeria, and the CBN. Discount houses operating in Nigeria also hold substantial shares.

    A NEFT payment is an irrevocable fund transfer instruction.

    Mrs. Onajite Regha said : “By the time we do six months into the new phase, the figure is likely going to rise by over 100 per cent.

    “All these places we are going to are places where cash is moved heavily. We are looking at six additional commercial centres. We should, therefore, not forget that right now, it is only Lagos that is functional.”

    Currently, there about 150,000 PoS terminals deployed in the country for the cash-less initiative, which commenced in January last year.

    The E-PPAN boss said: “By the time we started the Cash-less Lagos scheme, the projection of the regulator was that by December, 2012, we would have recorded 40,000 PoS terminal deployment. But available data showed that we now have about 150, 000 PoS machines in Lagos.

    “However, the question is: How many of the PoS are working? So, that is where I believe we need to work on. We need to have better connectivity to these terminals to encourage the merchants and the consumers to use the devices for seamless payment transactions.”

    The Deputy Governor, Operations, CBN, Mr. Tunde Lemo, who is responsible for driving the cash-less policy, recently explained that the additional states (Rivers, Kano, Anambra, Ogun and Abia as well as the FCT) for the cash-less initiative were chosen because of the large volume of cash transactions in some of their major cities.

    He said: “Recall that we started this programme actually in January last year and we are only just continuing. We are only just moving to phase two, so we have learnt all the ropes in phase one in cash-less Lagos and we believe we are ready to roll out to other six locations in Nigeria”.

     

     

     

  • CBN: cash-less extension to other states in July sacrosanct

    The planned extension of the cash-less policy to five states as well as the Federal Capital Territory (FCT) from July 1, is sacrosanct, Deputy Governor, Operations, Central Bank of Nigeria (CBN), Mr. Tunde Lemo has, said.

    The cash-less policy, which began in Lagos in January last year is billed to be extended to six more states ( Rivers, Kano, Anambra, Ogun and Abia as well as the FCT) in July 1.

    Lemo, who is responsible for driving the policy, said the additional states were chosen because of the large volume of cash transactions in some of their major cities.

    He said: “Recall that we started this programme actually in January last year and we are only just continuing. We are only just moving to phase two, so we have learnt all the ropes in phase one in cash-less Lagos and we believe we are ready to roll out to other six locations in Nigeria.

    “We are actually working in collaboration with the Bankers’ Committee. We have a subcommittee headed by the MD/CEO of UBA, who is the cash-less champion among the bank CEOs and together with the other institution like the Nigeria Interbank Settlement System (NIBSS) and others, we are working very hard to ensure that we dot all the I’s and cross all the T’s. I can tell you that we already have our road map and we are not going to shift the implementation date of the phase two, which is July 1, 2013.

    “We are ready to roll out to the six other states and there would be no change in date. We are not shifting the goal post. We have a roadmap, which is being followed and we are fully prepared,” he said.

    He said the previous challenge of the cash-less policy was connectivity.

    “ we have over 150,000 Point of Sales (PoS) machines in Lagos area where we had the cash-less Lagos. However, only 25 per cent of them are active largely because we don’t have General packet radio service (GPRS) and connectivity alive in some of the clusters and because of that, it has affected the rate at which those machines are used,” he said.

    Lemo however, said these challenges are being overcome. He said: “We believe very much that it is getting better because we monitor the transactions on daily basis and we are beginning to record large volume and value of transactions done under the Point of Sales (PoS). We are not even looking only at the PoS as a major of channel for cashless; we are now looking at all the other major channels for cashless. We have the mobile telephone, which we will use to drive the cashless policy.

    The cashless policy is aimed at reducing the dominance of cash in the system. It specifies penal charges for individuals and corporate organisations that want to withdraw or lodge cash above the prescribed limits.

    Under the policy, the banking watchdog pegged the daily cumulative cash withdrawal or deposit limit for individual accounts at N500, 000 per day and N3 million per day for corporate accounts.

  • Ghana, Nigeria, Japan lead global equities rally

    African equities have been the most resurgent so far this year as investors in Ghana and Nigeria scooped above-average returns on the back of increased domestic participation and stable foreign inflows.

    Year-to-date analysis of global equities’ returns showed that average return by Nigerian equities was nearly twice that of equities in United States of America (USA) and United Kingdom (UK). The analysis was based on opening data for Friday, May 10 tracked by FSDH Merchant Bank.

    The Ghana Stock Exchange (GSE) All Share Index (GSE ASI), which serves as benchmark for the Ghanaian stock market, indicated the highest return of 53.30 per cent. Japan’s benchmark Nikkei 225 Index recorded average return of 36.52 per cent. Nigerian Stock Exchange (NSE)’s benchmark index, the All Share Index (ASI), opened last Friday with a return of 27.43 per cent.

    The Dow Jones Industrial Average (DJIA) and the S & P 500 Index, which benchmark the USA market, returned 15.10 per cent and 14.06 per cent respectively. The FTSE 100 Index, which mirrors the UK stock market, recorded average return of 11.78 per cent.

    Turnover on the NSE last week stood at 1.69 billion shares worth of N21.39 billion in 28,392 deals. Financial services sector dominated the activities chart with a turnover of 1.31 billion shares valued at N12.17 billion traded in 15,796 deals. Banking subsector accounted for turnover of 917.182 million shares worth N8.53 billion in 11,236 deals.

    The ASI rallied 2.57 per cent to hit a high of 36,010.28 points while aggregate market capita-lisation of all equities rose correspondingly by 2.57 per cent to close at N11.513 trillion.

    Meanwhile, the rights issue of Transnational Corporation of Nigeria (Transcorp) has opened following approval-in-principle by the Quotations Committee of the NSE. Transcorp is issuing about 12.91 billion ordinary shares of 50 kobo each at N1 per share. The right issue is expected to close on May 31, 2013.

     

  • FITC to launch new products

    The Financial Institutions Training Centre (FITC), a special purpose professional services firm owned by the Nigerian Bankers’ Committee will launch new products on May 17 in Lagos.

    The products include FITC Virtual Learning, FITC E-recruitment, FITC Virtual library and the Nigerian version of the IFC Corporate Governance and Board Leadership Training Curriculum.

    In a statement, the institution said the products are part of the organisation’s transformation agenda started late 2009.

    “The products are aimed at enhancing FITC’s service delivery in line with emerging situations of its stakeholders as well as on-going reforms in the broader Financial Services Sector and national economy, for global competitiveness,” its Director, Dr.  Lucy Surhyel Newman said.

    He said the new products is part of the transformation agenda being implemented by the management of the organisation.

    “The first phase of the transformation, which started since 2009, involved FITC’s internal capacity and brand alignment to deliver on its brand promises to internal and external stakeholders, thus making FITC a high impact special purpose organisation nationally, regionally and globally,” she said.

    Explaining the rationale for the introduction of the products, Newman said the virtual learning will serve as an alternative medium for delivery of some of its training programmes in a timely, convenient and more accessible manner while the e-recruitment portal is designed to enable job seekers to submit their resume online to the organisation’s website and facilitate faster candidates’ selection process at optimal cost and from any part of the world.

     

     

     

  • FBN Capital inaugurates index

    FBN Capital Limited, the investment banking and asset management subsidiary of FBN Holdings Plc, has launched Nigeria’s manufacturing Purchasing Managers’ Index (PMI).

    In a statement, the bank said the product was done in collaboration with NOI Polls Limited. This adds Nigeria to the list of countries, which makes use of this economic indicator that gauges the performance of the sector at monthly intervals.

    The FBN Capital Limited PMI will join some existing surveys of business and consumer expectations and it is expected that this will develop into a core forward economic indicator for analysts, policymakers and financial market players as it is the only sector specific, monthly index.

    A PMI is a simple exercise. A selection of companies is asked their view each month on core variables in their business.

    Head, Macro-Economic and Fixed Income Research for FBN Capital, Gregory Kronsten, said: “A new PMI has the potential to become a leading forward economic indicator with influence on financial markets. Readings are released at the start of the new month, and since this is our first reading, we cannot identify trends.

     

    Once we have a track record of several months, we will be able to draw some conclusions.”

     

     

  • Fed Govt appoints Citi, Deutsche for $1 Eurobond

    The Federal Government has appointed Citi Bank and Deutsche Bank to manage a $1 billion planned Eurobond, the head of the debt management office (DMO) told Reuters last Friday.

    “The Federal Executive Council approved the appointment of Citi and Deutsche as joint book-runners for the planned $1 billion Eurobond,” DMO Abraham Nwankwo said.

    Minister of Finance and Coordinating Minster of the Economy Dr. Ngozi Okonjo-Iweala, had said at the recently concluded World Bank/International Monetary Fund (IMF) Meetings in Washington D.C, United States, that the Eurobond will be used to finance the power sector and gas development.

    The Minister said the Federal Government will float a Eurobond before the end of this year, stressing that a time table has been put together.

    The minister said: “The Ministry of Finance will undertake road shows in Europe and America to attract investors to subscribe to the bond. This will be our second Eurobond on offer, the yields on Nigeria bonds are good, this is an auspicious time for us to go and launch the Eurobond and so we are continuing.”

  • Liquidity rises on N387b TBs, OMO refunds

    The liquidity in the money market increased significantly last week as inflows of about N387.43 billion Treasury Bills (TBs) and Open Market Operation (OMO) bills repayment hit the market. Consequently, the interbank inter-bank rate fell by 408 basis points to 10.3 per cent, reflecting improved liquidity in the market.

    The call/overnight and seven-day money market rates fell to 10.29 per cent and 10.66 per cent last Thursday.

    The three-month Nigeria Interbank Offered Rate also fell to 11.5 per cent, though less activities are done on the tenor. The interbank secured lending (Open Buy Back) fell 379 bps to 10.25 per cent for commercial banks and discount houses.

    Meanwhile, the Central Bank of Nigeria (CBN) liquidity management remained active. It was supported by the circular issued last August reviewing its guidelines for how banks access its Standing Lending Facility window.

    Currency analysts at Ecobank Nigeria, Olakunle Ezun said the naira appreciated 0.2 per cent against the dollar in the Inter-bank. He said the appreciation continued to be driven by improved dollar supplies from the Nigeria National Petroleum Corporation (NNPC) and other oil companies. He said although the naira has a weakening outlook, the steady rise in reserves to $48.8 billion (around seven months equivalent of imports) and CBN’s MPC decision to hold rate unchanged at 12 per cent would provide a large cushion to support the naira in the weeks ahead.

     

    Sustainable banking practice

    Banks were urged by the CBN last week to consider environmental and social policies in their decision-making and lending processes. The apex bank also developed a reporting template for banks in filling their reports on loans to firms whose operations have negative impact on the environment. This was in line with the Sustainable Banking Practice being promoted by the banking watchdog.

    The CBN in a statement said Sustainable Banking is aimed at minimising or mitigating the negative impacts of financial institutions’ operations on the environment and local communities in which they operate especially on agric, power and the oil and gas sectors.

    According to the regulator, for the successful implementation of the principles, the institutions would be required to develop a management approach that balances the environments and social (E&S) risks identified with the opportunities to be exploited through their business activities.

    “The adoption of the principles will not only help banks in mitigating the E & S risks associated with their business operation and those of their clients, but also help them to achieve greater efficiencies and better position them to take advantage of opportunities in the global market place where environmental and social issues are becoming increasingly important.

    “They will also enjoy higher productivity, higher staff morale, lower turnover and absenteeism due to strong employee relations and workplace practices. The CBN would need to provide the structural mechanism to encourage consistent and widespread implementation of the principles and develop its institutional capacity to support the banks in their implementation of the principles,” it added.

     

    Money laundering

    The CBN reviewed its anti-money laundering/combating the financial terrorism (AML/CFT) regulation 2009. The policy was also aligned with the money laundering prohibition act and terrorism act as well as revised financial action task force (FATF) 40 recommendations initially issued in 2012.

    A circular to all banks and other financial institutions, signed by CBN’s Acting Director, Financial Policy and Regulation, I.T. Nwaoha, said financial institutions are to henceforth, report to the CBN and Nigeria Financial Intelligence Unit (NFIU) any asset frozen or actions taken in compliance with the prohibition requirements of the United Nations Security Council Resolutions on terrorism, proliferation of weapons of mass destruction and their financing including attempted transactions.

    He said during the establishment of customer relationship, or when conducting occasional transactions, a financial institution suspects that transactions relate to money laundering , then the institution should identify and verify the identity of the customer and the beneficial owner, whether permanent or occasional, and irrespective of any exemption of any designated threshold that might otherwise apply.

     

    ANAN

    The Ex-Registrar and Chief Executive Officer, Association of National Accountants of Nigeria (ANAN), Terkaa Gemade, said the last two years were for the actualisation of the association.

    ANAN, in a statement, said Gemade spoke in Abuja while presenting the achievements of the immediate past president of ANAN, Hajia Maryam Ladi at the association’s pre-annual general meeting dinner.

    “Today, we are celebrating the actualiser of ANAN vision. The vision that started in 1979 with ANAN not being known, not being wanted and today, the vision has been actualised,” he said.

    The former registrar commended the strategies pursued by Ladi Ibrahim to put ANAN on a right footing. He recalled the tortuous road the association passed through to become the most articulate and most liquid asset-based professional association in the country.

    Gemade also recalled the achievements of the founding fathers of the association and their numerous contributions toward the growth of the association. He also said that in the last two years, the association got the membership of international bodies such as the International Federation of Accountants (IFAC); Pan-African Federation of Accountants (PAFA); as well as Association of Accounting bodies of West Africa (ABWA). According to him, ANAN is also a member of the International Association of Accounting Education and Research.

     

    NDIC

    The Nigeria Deposit Insurance Corporation (NDIC) has blamed bank failures in the country on insider abuses, weak internal control system and poor corporate governance in many lenders. NDIC Deputy Director Research, Usman Wali disclosed this when members of the National Association of Banking and Finance Students (NABAFS), Federal Polytechnic Nasarawa visited the corporation in Abuja.

    In a statement, he said the role of the corporation in protecting depositors’ interest is key to the nation’s financial stability and economic development.

    Wali emphasised that the visit was crucial to the enhancement of the NDIC’s public awareness on its mandate and activities. The Deputy Director said the corporation’s operation is focused on its core mandate of deposit guarantee, banking supervision, distress resolution and liquidation.

    He said the NDIC insured deposit liabilities of deposit money banks (DMBs), microfinance banks (MfBs), licenced primary mortgage banks (PMBs) and licensed depositor of insured banks are entitled to up to N500,000 for DMBs and N200,000 for MfBs and PMBs in the event of failure.

    Representatives of Bank Examination Unit (BEU) Shehu Aladire said on-site and off-site activities of the corporation are aimed at operational efficiency and compliance with banking rules and regulations in the system. He identified the four types of on-site bank examination as maiden, routine, target and special examinations.

     

    London Exchange

    African companies that are quoted in the London Stock Exchange (LSE) raised 4.2 billion Pounds Sterling from the exchange in five years, the Lord Mayor of London, Alderman Roger Gifford had said.

    The listings cover periods from 2008 till date.

    He spoke during the United Kingdom-Nigeria Investment Partnership Forum organised by Guaranty Trust Bank in Lagos.

    The Mayor said there are a total of 600 non-UK companies currently quoted in LSE, adding that the Exchange gives opportunity to interested firms to be listed with minimal requirements.

    He said such listings must however, comply with ethical and regulatory requirements, adding that Nigerian firms are encouraged to list in the LSE. He said the Nigerian Stock Exchange (NSE) remains a gateway to African market, adding that there is however, need to build more confidence in the market.

    Chief Executive Officer, NSE, Oscar Onyema said the Exchange is looking inward and boosting local participation. He said the capital market appreciated by 35 per cent last year, and has so far achieved 19 per cent. He said the management of the NSE is committed to developing framework for the market operation. He urged Gifford to continue in his efforts at promoting further collaboration between NSE and LSE.

     

    Bank to bank report

    Access Bank has partnered MasterCard in its drive to promote cash-less and financial inclusion policy of the Central Bank of Nigeria (CBN). The collaboration was also involved the Nigerian National Identity Management Commission (NNIMC) in order to roll-out 13 million MasterCard-branded National Identity Smart Cards (NISC).

    In a statement, the bank said the collaboration was revealed on the sidelines of the ongoing World Economic Forum on Africa in Cape Town, South Africa.

    According the Bank’s Group Managing Director, Aigboje Aig-Imoukhuede, “Access Bank’s involvement in this project is testament to our ongoing efforts to expand financial inclusion in Nigeria. The new identity card will revolutionize the Nigerian economic landscape, breaking down one of the most significant barriers to financial inclusion – proof of identity, while simultaneously providing Nigerians with a world class payment solution”.

    Group Managing Director/Chief Executive Officer of Skye Bank Plc, Mr. Kehinde Durosinmi-Etti, said Nigerian banks are more favourably disposed to lending to oil producing companies if such firm’s oil reserves are confirmed.

    Speaking during the UK-Nigeria Investment Partnership forum held in Lagos, he said oil exploration is capital intensive in nature and it only makes sense to ensure that funds being availed the oil companies are paid back so that the banks will not suffer monumental losses and put shareholders capital at risk.

    Speaking on “Sustainable oil and gas sector Reforms” he said the consolidation exercise in the banking industry has strengthened banks’ ability to fund the oil and gas sector, even as he stressed the contributions his bank has made in strengthening players in the local exploration market.

    He explained that since banks do not want to lose money, they would rather lend to oil exploratory companies after reserves have been confirmed.

    Speaking on the marginal oil fields, which were given to indigenous companies and investors, he said the challenge banks face in lending to indigenous oil firms is that some of the companies have one dominant individual as the promoter, which is not in tandem with good corporate governance.

  • Cadbury Nigeria assures on future growth

    •Nigerian Breweries raises dividend payout policy to 80%

    Cadbury Nigeria Plc yesterday outlined strategic priorities for increasing shareholders’ value in the years ahead as shareholders unanimously approved the distribution of N1.6 billion as cash dividends- the company’s first payout in seven years.

    At the Annual General Meeting at The Civic Centre, Victoria Island, Lagos, the board, management and shareholders of Cadbury Nigeria were about the future of the food drink company. They approved dividend per share of 50 kobo, and product-gifts to attendees, appeared to denote the full turnaround of the company.

    Audited report and accounts of Cadbury Nigeria for the year ended December 31, 2012 showed marginal decline in sales, but improved cost and financing management squeezed out more profit than the previous year. Although tax provisions impinged on net earnings, underlying profitability ratios showed stronger performance.

    Gross profit margin inched up to 33.1 per cent in 2012 as against N32.7 per cent in 2011. Profit before tax margin also improved modestly from 14.8 per cent to 16.4 per cent. Both indices indicated that the company witnessed improvement in average profit per unit of sales, in spite of the decline in actual figures. While total sales dropped marginally by 1.6 per cent from N34.11 billion to N33.55 billion, profit before tax increased to N5.51 billion in 2012 compared with N5.05 billion in 2011. However, increase in tax provisions reversed net profit after tax by 5.9 per cent to N3.46 billion as against N3.67 billion in previous year.

    Addressing shareholders at the meeting, chairman, Cadbury Nigeria Plc, Mr Atedo Peterside, said that though the company ended the 2012 business year on a very strong footing, the company remains committed to sustaining the current transformation of its business.

    According to him, the focus on delivering sustainable growth, efficiency and capability will remain the platforms through which the company would deliver increasing shareholder value in 2013.

    He outlined the strategic priorities of the company in 2013 to include investment in the equity of its leading brands, especially Bournvita, TomTom and Tang; increased innovation and introduction of new and exciting consumer brands and scaling up of the company’s route-to-market transformation programme.

    Peterside added that the company would sustain focus on quality and drive improvements in productivity and operational efficiencies with a view to maximising the company’s competitive advantage.

    He pointed out that the company would focus on building a strong sustainable business and developing an organisation with high potential talent.

    In a related development, Nigerian Breweries Plc has increased its dividend payout policy to 80 per cent of its net profit from the initial 60 per cent.

    Speaking at the company’s Investor Forum in Lagos yesterday, Managing Director, NB, Mr Nicholas Vervelde, said the company invested N36 billion on expansion of its various projects to increase its market share value and improve on dividend payment.

    According to him, the amount was an increase of 98 per cent over the 2011 figure. This he said was for business expansion, which will prepare the company for the expected growth in the industry and support growth of its brands.

    “The company is well positioned to take advantage of any growth in the market to sustain its leadership position and maintain healthy yield on investment for its investors. This excellent revenue performance is supported by the continuous investment in rich portfolio of brands as well as their route to the market,” he said.

    The company turnover rose by 19.7 per cent to N252.7 billion in 2012. Profit for the year stood at N38.1billion.

    He said that this outstanding result was underpinned by a robust top line growth of 20 per cent that significantly outperformed the market in a very challenging year.

    The Nigerian Breweries boss explained that the positive revenue resulted from volume growth and reflected the continuous improvement in the supply of the company’s products. This he said, was also supported by the continuous high investment in their rich portfolio of brands.

    Meanwhile, Cadbury Nigeria’s market consideration improved by N1.40 to close at N38.90 per share as strong resurgence in bullish trading halted a two-day decline at the Nigerian Stock Exchange (NSE).

    Aggregate market value of all quoted equities rose to N11.346 trillion as against its opening value of N11.131 trillion. The All Share Index (ASI), the main value-based index for the stock market, trended upward from 34,815.24 points to 35,486.44 points.

    Nestle Nigeria and Nigerian Breweries led 39 other stocks on the gainers’ list with addition of N5 each to close at N915 and N170 respectively. Dangote Cement rallied N3.16 to close at N178.22. UAC of Nigeria rose by N1.10 to N71.10. Zenith Bank added N1.05 to close at N21.40 while Guaranty Trust Bank chalked up N1 to close at N27.

    With 41 gainers, there were only 12 losers in the overtly bullish market. Total Nigeria recorded the highest loss of N4.80 to close at N145.20. Beta Glass placed second with a loss of 20 kobo to close at N9.80. Union Bank of Nigeria dropped by 12 kobo to N9.58 while Costain (West Africa) lost 10 kobo to close at 96 kobo.

    Investors staked N5.02 billion on 390.69 million shares through 5,680 deals. Banking subgroup accounted for 259.27 million shares worth N2.24 billion in 2,343 deals.

     

     

     

     

  • RenCap lowers Diamond’s, FCMB’s 2013 profit forecast

    The 2013 earnings forecast of Diamond Bank Plc and First City Monument Bank (FCMB) Plc have been lowered by Renaissance Capital (RenCap) -an investment and research firm.

    In an emailed report obtained by The Nation, RenCap dropped Diamond Bank’s Profit Before Tax and Profit After Tax forecast to N33.2 billion and N23.3 billion, respectively over higher operating costs and tax rates.

    It said growth, capital and impairment charges were the overriding themes in Diamond Bank’s 2012 performance. Overall, PBT of N28 billion came in five per cent lower than its forecast but PAT of N22 billion was two per cent ahead of its forecast.

    However, it said Diamond Bank was the fastest growing bank in its Nigerian banks universe over 2012, with loan growth of 51 per cent year on year and asset growth of 48 per cent year on year to N1.2 trillion. Ranked by total assets, the lender, it said, is the largest tier-2 bank in the country.

    “This rapid growth stressed its capital adequacy ratio (CAR), but the bank received some relief following the $170 to 200 million of tier 2 capital raised in 2012 and the retention of all its 2012 earnings,” it said.

    However, Return on Equity dropped to 22.8 per cent in FY12 from 25.2 per cent in September, on the back of a lower fourth quarter Net Interest Margin (NIM), derivative losses and strong cost growth in fourth quarter.

    “We regard Diamond’s first quarter 2013 numbers as lackluster as it was all about a falling NIM and rising costs. The NIM collapsed to 9.7 per cent in first quarter 2013 from 10.9 per cent in year ended December 2012, largely on the back of a rising cost of funds,” it said.

    RenCap said the lender’s costs were disappointing as it went up 38 per cent year on year, driven by branch and IT investments, and the Asset Management Corporation of Nigeria (AMCON) levy. The cost/income ratio (CIR) deteriorated to 61 per cent from 52 per cent in first quarter 2012, not an encouraging trend.

    “An impairment charge of N3.3 billion trailed management’s N20 billion guidance for the year and implying a cost of risk of 2.1 per cent. It lowered the bank’s 2013 PBT and PAT forecasts to N33.2 billion and N23.3 billion, respectively, on the back of a lower NIM, higher costs and a higher tax rate,” it said.

    “Operationally, we expect Diamond Bank’s 2013 performance to depend largely on cost of risk and cost growth, as the bank’s earnings are highly geared to these two variables. Given management’s guidance of a shrinking NIM, low NIR growth and a 30 per cent tax rate, we think meaningful earnings growth (and indeed any earnings growth) will be a challenge for Diamond this year without a positive surprise on either the impairment or cost line,” it said.

    It also lowered FCMB’s 2013 PBT and PAT forecast to N20.9 billion and N18.5 billion, respectively, implying PBT and PAT growth of 30 per cent and 21 per cent respectively, year on year.

    It noted 2012 was the first year of the combined FCMB/Finbank entity, with regulatory approvals delaying the integration. Overall, RenCap said last year’s numbers were in line with its expectations, noting that NIM – similar to tier 2 peers, NIMs declined in 2012 on the back of rising cost of funds, falling to 6.7 per cent from 7.2 per cent last year.

    However, term deposits dropped in fourth quarter 2012 to 37 per cent of the deposit book, from 40 per cent in last September, which is expected to support lower cost of funds in 2013.

    Also, the release in September 2012 of Finbank-related cost provisions led to a 71 per cent drop in costs quarter on quarter, and an improvement in the Cost Income Ration to 60.3 per cent from 76 per cent. Impairment charges – the gains on the cost line were offset by a jump in impairment charges to N12.7 billion, from N704 million in September.

    “Management attributed this spike to provisions taken on a number of legacy loans that failed to perform on the restructured terms. We think the bank under-provided in prior quarters on the back of optimistic assumptions, as we do not think the challenges with these loans suddenly came to light in the fourth quarter,” it said.