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Tag: Banks

  • Different strokes for different banks

    Different strokes for different banks

    For many banks, the second quarter which ended in June was not a season to cheer about. Their profits dipped. Some are blaming it on the Central Bank of Nigeria (CBN) policies which reportedly cut banks’ loanable funds and income margins. But, what was the magic for those that made profit? COLLINS NWEZE reports.

    Capital is key to business. This explains why banks panicked when the Central Bank of Nigeria (CBN) raised Cash Reserve Ratio (CRR) on public sector deposits from 12 per cent to 50 per cent in July, last year. In March, the ratio was raised to 75 per cent.

    CRR on private sector deposits also rose by 300 basis points from 12 per cent to 15 per cent during the last CBN Monetary Policy Committee (MPC) meeting in March.

    Seeing the effect of previous hikes on banks’operations, the MPC left CRR, Monetary Policy  Rate (MPR) and other indicators unchanged at its last month’s meeting. For many banks, especially those with weak deposit base, it was bad business.

    These policy adjustments creamed  off over N1.5 trillion from banks’ vaults and put it in CBN’s custody. When banks started releasing their fiscal year 2013 results, many pundits were interested in knowing the impacts changes in cash reserve, reduction on Commission on Turnover (COT), removal of Automated Teller Machine (ATM) charges and increase in contribution to the Asset Management Corporation of Nigeria (AMCON) levy had on their profit.

    Some of the banks posed good results; other had a poor showing.

    The half year ended June 30 result of Skye Bank indicated that its Profit Before Tax (PBT) dropped to N7.266 billion as against N10.545 billion during the corresponding period in 2013. Profit after tax also decreased to N5.786 billion as against N8.428 billion the previous year.

    With gross earnings of N63.9 billion, interest expense dropped by 24 per cent yearly to close at N20.7 billion compared to N27.2 billion as at June, last year, in line with the bank’s operational strategy of increasing the volume of low cost funds in its deposit portfolio.

    “Our loan impairment charge increased by 100 per cent year-on-year to N5 billion, being a deliberate policy of aggressive provisioning early in the year to enable a fairly sustained position and avoid high-figure concentration in the last quarter. Exchange earnings improved by five per cent to N5.8 billion compared to N5.5 billion of the corresponding period in 2013,” the bank said.

    Giving insight on the reasons for poor outing of most banks, Timothy Oguntayo, the new Chief Executive Officer/Managing Director Skye Bank Plc, at a briefing, said the 0.5 per cent sinking fund being contributed to the Assets Management Corporation affects operating expenses.

    Fidelity Bank Plc’s PBT for the half year ended June 30, stood at N9.43 billion, its Chief Executive Officer, Nnamdi Okonkwo, has said. The PBT represents a drop of 16 per cent from N11.2 billion recorded in the Half Year ended June 30, 2013. However, second quarter PBT was N4.97billion, which represents a growth of 12 per cent from N4.45 billion recorded in first quarter of the year.

    Total Customer Deposits declined by five per cent to N766 billion as at June 30, this year from N806 billion as at December 31, last year as we rebalance our deposit book on account of high Cash Reserve Requirement on public sector deposits and continuous re-pricing of the deposit book.

    “On a quarterly basis deposits recorded a marginal growth in second quarter 2014 while interest expense remained flat in a period of increased monetary tightening. Net Loans and Leases grew by three per cent to N438 billion as at June 30, 2014 from N426 billion as at December 31, 2013, loan growth was 19 per cent from June 2013 to June 2014,” it said.

    Okonkwo said the result is in line with the lender’s 2014 fiscal year and medium term Return on Equity (ROE) target, adding that the lender’s shareholders’ funds stood at N166.38 billion within the period.

    He said the result showed a gradual impact of some of the transformation it commenced at the beginning of the financial year, adding that the PBT rose by 12 per cent in the second quarter and net interest income improved by 32 per cent between June 2013 and June 2014.

    “We are confident that the profit and efficiency momentum will be sustained in the coming quarters as we implement our newly tested lending structures, to grow the loan book in the Small and Medium Enterprises (SMEs) and retail segment while consolidating on our niche corporate banking play,” he said. He said the lender’s gross earnings grew by one per cent from N62.9 billion recorded in first half of 2013 to N63.3 billion that of this year.

    Also, First City Monument Bank (FCMB) Group second quarter result for the period ended June 30, 2014 showed the PBT grew by 4.6 per cent to N11.14 billion, while PAT rose by 3.2 per cent to N9.6 billion during the period.

    FBN Holdings Plc, the holding company for First Bank of Nigeria (FBN) Limited and its previous subsidiaries, grew its top-line by 7.9 per cent to N212 billion in the first half of this year.

    Interim report and accounts of FBN Holdings for the period ended June 30, this year released at the weekend showed that gross earnings rose by 7.9 per cent to N212 billion in first half 2014 as against N196.4 billion recorded in comparable period of 2013. The top-line showed mixed performance from the interest and non-interest incomes.

     

    Analysts’ views

    Equities analyst at Renaissance Capital (RenCap), an investment and research firm, Adesoji Solanke, said lenders must be disciplined on the cost line, and properly manage their impairment charges before they could deliver earnings growth. He said most banks’ managements acknowledged the current challenges and their initial focus will be on reducing the funding costs by continuous downward re-pricing of costly term deposits.

    For Fidelity Bank, Solanke said the lender would be significantly more focused on driving e-banking products for customer mobilisation. On the asset side, he said Fidelity is positioning itself to be a Small and Medium Enterprise-focused bank, and, coupled with its payroll lending retail book, management expects combined exposure to rise to 50 per cent over the medium term (2017), from 28 per cent last year.

    He said the bank’s management has also been re-pricing the existing loan book and plans to periodically review all concessions and lending rates. “The turnaround process is under way, but we think in the short term, investors are likely to retain a preference for the more liquid and relatively cheap tier one names,” he said.

    Vetiva Capital Management analysts predicted that on an aggregate level, the banking industry 2014 gross earnings would take a potential $690 million annual hit, assuming a 12 per cent yield on the newly sterilised CRR deposits. They said the impact will vary from bank to bank depending on how much public sector deposits on their books.

    But Sterling Bank Executive Director, Abubakar Suleiman, disagreed that banks have performed poorly. “If you look around, most banks in Sub Saharan Africa did not do better than 15 per cent Return on Equity (ROE) in 2013. Nigerian banks are averaging 20 per cent ROE. So, that is not poor performance. Also, it is at a time that the sector is also growing. Is it true that the headwinds exist? Yes,” he told The Nation.

    Suleiman said the cost of resolution for the crisis of 2009 is something that will be with banks for a while but that, he added, should not stop them from aspiring to deliver good returns. “These are difficult times. A time when the government and regulatory authorities are trying to stabilise prices, including exchange rates and interest rates, and the choices available to them are limited”.

    And again, these are not policies that will be there forever. They will be applied in the best interest of the country, and when things stabilise, we expect some of these policies to be reversed and profitability will improve for the banks,” he said.

    He said the CBN could not allow a certain level of liquidity in the system when there is pressure from the exchange rate. “And even the banks themselves are not better-off if liquidity is allowed in the system because what they gain, in terms of interest income, they may end up losing if there is significant devaluation or devaluation that is not managed properly. In my view, the CRR hike is something that must happen, and is not going to prevent any serious minded bank from returning decent ROE,” he said.

    Suleiman said his bank achieved its objective, and the target that was set for last year despite the difficult operating environment. Suleiman said the increase in top line performance is impressive considering the harsh regulatory environment and the tightening stance of the CBN which have put pressure on earnings of most banks.

    “Most importantly, we also reduced our cost to income ratio, and we are a more efficient bank today than we were before. We also achieved a 40 per cent growth in our risk assets, and 22 per cent growth in total assets. So, it is an encouraging performance that we are very proud of and intend to repeat in 2014,” he said.

     

    Banks’ reactions

    Banks are raising dollar-funds to fund businesses in power, oil and gas sectors. The lenders are also embracing e-payment to reduce cost of operation while also improving their commitments to Small and medium Enterprises (SMEs) sector. There is also renewed zeal to fund mortgage, agricultural and educational businesses. Banks are also reviewing their business development strategies aimed at achieving improved earnings.

    In late April, the Group Managing Director, UBA Plc, Phillips Oduoza,  announced a major shift in the lender’s business model and strategy to improve its earnings in Nigeria and African subsidiaries. The bank has 18 subsidiaries across Africa.

    The lender had in May 1, split its operations into two broad directorates, UBA Africa and UBA Nigeria, both under UBA Plc. The bank also appointed two deputy managing directors to head the UBA Africa and UBA Nigeria directorates, and mandated each division to contribute 50 per cent to the lender’s group profit targets.

    He said competition between the two directorates will be positive and improve its earnings. “We have taken a decision on how to drive Nigeria and African divisions and earn the full benefits of our investments,” he said.

    Oduoza said the bank was not restructuring, but was redeploying its resources in a  optimally to achieve its objectives and improving earnings.

     

  • Why banks must curb fraud, by Emefiele

    Why banks must curb fraud, by Emefiele

    Which continent has the highest fraud cases? It is Africa, according to the 2013 Global Fraud Report.

    Central Bank of Nigeria (CBN) Governor Godwin Emefiele, who made this known at the Chief Compliance Officers of Banks in Nigeria (CCOBIN) Conference in Lagos, said the report was a wake-up call for the region’s financial institutions to stem fraud and related incidences.

    According to him, among other regions surveyed, Sub-Saharan Africa scored 77 per cent as the area with the most prevalent fraud problems. For physical assets thefts, it scored 47 per cent; corruption, 30 per cent; regulatory or compliance breaches, 22 per cent; internal financial frauds, 27 per cent and misappropriation of organisational funds, 17 per cent. It also showed that 2.4 per cent of the regions revenues are lost to fraud.

    Represented by Deputy Governor, Operations Adebayo Adelabu, Emefiele said though the need for compliance has imposed additional costs on banks, the right thing must be done to protect the system from local and international fraudsters.

    He advised banks to always comply with regulations as risks of non-compliance is costly, saying: “If they think compliance is costly, let them try non-compliance.”

    Emefiele said while fraud and corruption were international in coverage, their incidence was pronounced in third world countries, including Nigeria because of result of perverse incentives.

    To overcome this challenge, he said financial institutions were required to keep track of transactions involving high risk customers, such as Politically Exposed Persons (PEPs) and Financially Exposed Persons (FEPs).

    He said it was because of these consequences that regulatory bodies, have set up standards and regulations to curb the menace.

    Emefiele said Nigeria has adequate legal and regulatory measures for addressing breaches of the Know Your Customer (KYC), Customer Due Diligence (CDD) and Enhanced Customer Due Diligence (EDD) provisions. “It is the application of these KYC provisions that are meant to reveal illegitimate sources of funds and trigger investigation by relevant stakeholders that matters. Like in many developing countries, compliance has been a major regulatory challenge in Nigeria,” he said.

    In his presentation, founder and Managing Director, DataPro Limited Abimbola Adeseyoju said criminals know that there are compliance procedures, such as KYC. They, therefore, come prepared, hence the need for lenders to go the extra mile in verifying their customers’ identities.

    He said fraudsters either modify their identity slightly, or create a synthetic identity which can be detected through a Link Analysis Solution. This applies advanced analysis to determine the risk level for both the network and every individual associated with the network, he said.

    Examples of attributes that could be shared and linked are Personal Identity Information, Account Information and Transactional Information.

    “Once the entities are linked together, advanced analytics are applied to determine the level of risk and create a risk score. The i2 Notebook used by the Financial Intelligence Unit (FIUs), among others, enables them to search multiple data sources simultaneously, find hidden links and entities and visualise transactions and timelines,” he said.

    Adeseyoju advised financial institutions to pay special attention to all complex, unusually large transactions, or unusual patterns of transactions that have no visible economic or lawful purpose. Continuing, he said the lenders should investigate suspicious transaction and report its findings to the NFIU immediately.

    Deposit Money Banks (DMBs) have in the last three years committed over N2 billion to the KYC, CDD and EDD provisions, The Nation has learnt.

    Management Executive, Obrien Research & Data Management Bright James said so much investment was going into KYC, CDD, EDD, pension statement verification and reference letters for banks’ staff, adding that the lenders were going the extra mile in verifying customers’ details at the commencement of business relationship.

    The verification, he said, became more helpful for banks, especially in handling those seeking credit, or customers that want to borrow.

    “The KYC verification by independent enquiry is good for banks. Bank staff are doing their best in carrying out these roles, but contracting it to consultants has proved to be more reliable for banks,” he said.

  • Banks may raise N400b to boost capital base

    Banks may raise N400b to boost capital base

    BANKS may raise some N400 billion in the current capital raising phase to strengthen their capital base in view of the impending implementation of the Basel II.

    The Basel II is the second global standards of capital adequacy issued by the Basel Committee on Banking Supervision under the auspices of the Basel, Switzerland-based Bank for International Settlements (BIS), the oldest international financial organisation that coordinates central banks and standards for the international financial markets.

    The Basel Committee has issued three sets of the global standards including Basel I, Basel II and Basel III, which increased stricter capital risks and exposure management requirements from one level to another.

    Basel II seeks to strengthen banks’ risk and capital management through three main areas, otherwise known as pillars. The first pillar deals with minimum capital requirements, the second pillar deals with supervisory review process while the third pillar deals with processes relating to market discipline. The pillars generally ensure that the greater the risk to which a bank is exposed, the greater the amount of capital and required supervisory framework.

    After initial delay, Nigeria has set October 31, as the cut-over date for the implementation of Basel II.

    Investment banking sources said many banks have started the process of raising funds, a new level of activities that is expected to increase the momentum of the current phase of fund raising, which gathered pace in 2013.

    Several pundits in the know of undercurrents in the capital market indicated that banks might raise some N400 billion to boost their capital base and strengthen their compliance level in view of the stricter requirements under Basel II.

    According to the sources, although the average capital adequacy ratio in the banking industry is high and most banks are above regulatory benchmark, banks might need to support their adequacy ratios, which are expected to fall after the cut-over.

    The sources indicated that banks might combine debt and quasi-equity instruments with outright equity issues with focus on both tier I and tier II capital.

    Market sources, some of who are involved in the capital raising processes, said the upwardly performance at the stock market should encourage banks to float supplementary capital issues.

    Many banks, including Sterling Bank, Skye Bank, Diamond Bank, Unity Bank, Wema Bank and Zenith Bank have already completed initial phase of capital raising and have outlined further plans to raise more funds.

    Several analysts’ reviews on the banking sector have outlined capital raising as a major theme for the banking sector citing new regulations and emerging business opportunities.

    Banks, under the auspices of the Bankers Committee, had decided to increase lending to the power sector.

    The strategic funding plan is focused on aligning the banking system to provide adequate financing to meet the peculiarities of the power sector.

    Nigeria is estimated to need more than $35 billion to meet its target of 40,000 megawatts by 2020.

  • 2015 Cup of Nations ticket: Babayaro banks on Enyeama

    2015 Cup of Nations ticket: Babayaro banks on Enyeama

    Former Super Eagles goalkeeper, Emmanuel Babayaro has continued to praise the heroic performances of Eagles stand-in Captain and first choice in goal Vincent Enyeama at the last World Cup in Brazil.

    He has again tipped the Lillie Football Club of France star to again lead the Eagles to defend their crown in the next edition of the Africa Cup of Nations (AFCON) in Morocco next January.

    He emphasised on the number of saves the former Enyimba International goalkeeper made in each of the four matches Nigeria played in Brazil before the team was ousted by France in the round of 16.

    “I always ask my journalist friends and some group of people some questions any time they say we (Nigeria) tried at the last World Cup held in Brazil. I asked them did you see how many saves Enyeama made in the match against Argentina and other matches played at the World Cup? Imagine if it was a regular goalkeeper what the score would be.

    “In each of the four matches the Eagles played at the World Cup Vincent Enyeama made not less than six (6) to eight (8), 100 per cent close saves,” Babayaro disclosed.

    He, however, threw his weight behind the Lillie of France star to continue to lead the Eagles to future successes.

    “Enyeama will surely continue from where he stopped at the Brazil 2014 World Cup and help the country get the ticket for the Africa Cup of Nations holding in Morocco next year,” the Atlanta Olympics gold medalist told Sportinglife.

  • Nigerian banks yet to have strong workforce

    Despite the listing of ten local banks among the 1000 biggest banks globally, the industry is yet to grow its workforce to an enviable height.

    The chairman, Chartered Institute of Bankers of Nigeria(CIBN), Mr. Bolade Agboola,  gave this submission during a media parley to herald the 2014 Lagos Bankers’ Nite with the theme:  ‘Human Capital: Value Creation and Capacity Building for Financial Services Sector in a Frontier Economy.’

    Agboola said the theme was apt, in view of the problems in the nation’s banking and the entire financial services sector.

    He said the industry has moved from doom to a booming era, arguing that a strong and committed workforce is required to position the industry for growth.

    He said once this happens, the banks would not find it difficult to be among the best 100 banks in the future.

    Rating agencies, the CIBN boss observed, look at indices such as banks’ capitalisation, branch network, total assets, contributions to the Small and Medium Scale Enterprises (SMEs), among others, before including banks among the top-performers globally.

    “Nigeria’s economy has just gone through a recession, occasioned by the global meltdown of 2008.  The Central Bank of Nigeria (CBN) and the Assets Management Company of Nigeria (AMCON) have intervened by initiating reforms in the industry,” he said.

    Raising some posers, he said: “What services are banks rendering to the economy within and outside the country? What is the value of the value of the economy?  What is the level of the per-capital income in Nigeria? These are what determine the strength of an economy. To achieve these, strong manpower is required in the financial industry become it has become one of the major drivers of over economy.”

  • Ndanusa banks on weightlifting for gold medal haul

    Ndanusa banks on weightlifting for gold medal haul

    Nigeria Olympic Committee (NOC) President Engineer Sani Ndanusa is banking on the high ratings and performances of the Nigerian weightlifters to get gold medal haul for Nigeria at this month’s Commonwealth Games in Glasgow, Scotland.

    The former Minister who was elated with the performance of the Nigerian weightlifters in the weightlifting trial held at the Abuja National Stadium, Package B recently confessed to SportingLife that the only sports that is crystal clear to fetch Nigeria gold medals at the Games is surely weightlifting in men and women’s categories.

    The former Sports Minister who was a Special Guest at the Trial held in Abuja to prepare the weightlifters for the 2014 Glasgow, Scotland Commonwealth Games was a satisfied man after watching impressive lifting in the men’s 165kg, 170kg, 175kg and 180kg clean and jerk categories at the Trials.

    Sodique Jamiu and Gideon Aigbovo were very impressive in the competition with heartwarming performances.  Both Jamiu and Aigbovo lifted 170kg, 175kg while they failed in the 180kg but Aigbovo almost lifted the 180kg. The Chairman of the weightlifting Coaches Association Peter Young told SportingLife at the end of the competition that Gideon Aigbovo has the capability of lifting the 180kg with hard work and more training before the Commonwealth Games in Glasgow, Scotland.

    A very happy NOC boss assured the weightlifters and their coaches that plans have been concluded by the National Sports Commission to send the team on a training tour abroad which will further prepare them for the Games which he said would be tougher than the last edition since top athletes in the Commonwealth family would be eligible to compete.

    “I am quite happy with what I saw in today’s (last Friday’s) weightlifting trials as regards the size of the lift and the quality of the lifters. All the athletes that have qualified are really looking forward to the competition. Right from time weightlifting has been one of our assured sports and areas of achievement and I don’t envisage anything different in what will happen in Glasgow. At the last edition in India we took all the medals that were available so this year again I want to assure Nigerians that we will repeat more than that. I am glad and happy with what I saw and we will continue to monitor them throughout their preparations.

    “Right now I have been told that they are going on training tour and will commence immediately and from there Glasgow here we come,” Ndanusa disclosed.

    He, however, envisaged tough Games in this year’s edition since top athletes and world and Olympics record holders have signified their intention of participating in Glasgow 2014 edition of the competition.

    “The Commonwealth in Europe is going to attract many high quality athletes because of the location. It will be more like an Olympic Games because world beaters are coming. We look forward to it and I can assure Nigerians that we will do our utmost best in the competition,” he assured.

  • IBM chief advises banks on technology, security

    IBM chief advises banks on technology, security

    COLLINS NWEZE

    The Vice President, IBM Tivoli Storage, Software Group, Steve Wojtowecz has advised banks to adopt efficient and quality banking software despite high cost of such acquisition to achieve enhanced banking security.

    Wojtowecz, who spoke on the benefits of the Edge 2014 conference recently held in Las Vergas, United States, said the event was meant to show clients and associates, IBM’s technological inputs in today’s world, that banks should ensure that people responsible for data applications are highly efficient as that remains one of the first steps to banking security.

    He said the cost for acquiring software will be upset in a matter of months from efficiency, arguing that securing efficient and seamless software remains the best option for banks, telecommunication firms and other operators remains the best way to maximise output.

    “Efficient banking software is costly but data storage is also very important. Buying software is relatively inexpensive compared to the benefit one gets,” he said.

    He said banks should have several layers of security and authentication so that should one layer fail, the other can continue.

    The IBM chief said fraud prevention and detection can be for different reasons. “There are many mechanisms a bank can implement to limit fraud, because preventing it is very difficult. Limiting fraud is the best case option at the moment. What they are trying to do is that there is authentication, taking the multifunctional applications to where you can. Anything from fingerprints, to extremely strong password could be helpful,” he said.

    “I think banks change their applications because as the business changes, the software have to change to support the users. So, it might be because of the person working in the bank, or the bank customer,” Wojtowecz said.

    He explained that a change of application can also be to support a bank employee, the consumer of the commercial bank, financial institutions for real estate, or stock exchange. “So, when companies change their applications, they do so for the user to meet a particular need. Despite the reason for such action, I know it is very hard to throw away an application,” he said.

    Wojtowecz said when developing banking software, it is important to think of certain things. Firstly, the application must have the capacity to put a data at the right place, and continuously as the data is generated.

    He said companies can sometimes create a level of software, with much smaller software, depending on the level of virtualisation needed. “Sometimes you have software-defined storage, sometimes you have software-defined environment, and software-defined networks,” he said.

    According to him, there is need to understand the language software speak even as they also have to interconnect. He said the banks always want software with higher utilisation which is also costly.

  • Banks’ assets to hit $168b

    Banks’ assets to hit $168b

    The banking sector is expected to grow to over $168 billion by 2015, a KPMG report on the subsector has said. The sector was worth $117 billion as at 2011, a Customer Service report by the global auditing firm said.

    The report said while Nigeria may be Africa’s most populous country, only about 20 per cent of the population is banked and two-thirds have never been banked at all.

    KPMG said the sector has recently experienced some regulatory changes, including a repeal of universal banking licences and the promulgation of more stringent regulations by the Central Bank of Nigeria (CBN), which was aimed at reducing soaring books of non-performing loans and stamp out severe breaches of corporate governance.

    “However, with the establishment of the Asset Management Company of Nigeria (AMCON) to purchase toxic assets of banks and recapitalise troubled banks, some stability has returned to the sector,” it said.

    This development made the leading rating agency Standard & Poor’s (S&P), to upgrade the sector in 2012 to a positive outlook due to the country’s improved asset quality, capitalisation and corporate governance.

    The report posted on the firm’s website said with Automated Teller Machines (ATMs) becoming almost ubiquitous in the cities, it was not surprising that it had become the fastest growing channel in recent years.

    “Almost eight in 10 customers surveyed use the ATM and nearly two thirds of these people visit an ATM on a weekly basis with cash withdrawal and balance enquiry amongst the most common transactions customers perform via the ATM,” it said.

    However, it said despite the proliferation of new channels in recent years, adoption of other alternate channels is still comparatively low.

    It also said there were very few respondents. It listed its report as follows: internet banking (seven per cent), Point of Sale (six per cent), telephone banking (five per cent) and mobile payments (two per cent).

    Of the respondents that had used internet banking, one-third were private sector employees and 15 per cent, students.

  • Why banks will not increase lending, by RenCap

    Why banks will not increase lending, by RenCap

    Banks are still hunted by the 2007 meltdown, when they gave out non-performing and delinquent loans that triggered the global financial crisis, a report by Renaissance Capital (RenCap), has shown.

    In the report tagged: “Global Emerging and Frontier Markets: Which markets can boom?”  RenCap said those fears made it difficult for the lenders to increase their loans.

    It said despite the problems, banks must improve on their lending to support equity prices.

    According to the investment and research firm, banks have become cautious following their experience in lending 14 per cent of the Gross Domestic Product (GDP) in 2007. It predicted a modest rise in nominal growth from 13 per cent last year to 16 per cent this year. “We expect a modest uptick in nominal growth, from 14 per cent in 2013 and 16 per cent in 2014,” it said.

    According to the report, the growth index suggests the main bid for equities will continue to come from rapidly rising local pension fund money and frontier cash. “It explained that in the first quarter of 2014, and perhaps the entire first half of 2014, we see Nigeria outperforming Kenya, due to movements by frontier investors,” it said.

    RenCap said Nigeria’s rising weight in the Morgan Stanley Capital International (MSCI) index, up from 14 per cent to 20 per cent  is one factor behind this, adding that assumption of naira stability remains critical.

    It said analysis of debt cycles shows that credit booms have tended to drive equity returns. “Conceptually, we think this makes sense, as credit booms have tended to coincide with accelerating economic activity, periods of low interest rates and strong corporate earnings,” it said.

    It said the magnitude of the credit expansion is key, especially when credit is growing faster than GDP is expanding, there is a greater opportunity for equity and other assets to perform well.

    Put simply, excess growth of credit tends to spill over into asset prices, including property and equity and can eventually feed through into inflation,, he added.

    “Nigeria, Mexico and Turkey also have a somewhat supportive credit-growth trend although Turkish credit growth and pricing are increasingly dependent on the availability of funding,” it said.

  • Banks’ road to higher profit

    Banks’ road to higher profit

    There are two sides to a report. The true and the false sides. Many banks like to give the false side to hide their sordid deeds. Unknown to them, they are undoing themselves. By adhering to transparent and efficient reporting standards, banks, experts say, will be rewarded with higher returns on investment and an improved risk management system. COLLINS NWEZE reports.

    For banks, the road to higher profit and sustainable business practices lies in improved reporting standards, but, many of them seem not to know this as they continue to lie with statistics.
    With improved reporting standards, banks are expected to enhance their overall risk management, reduce cost of operations, create more avenues for fresh capital inflows and the ability to attract and retain talents.
    Many banks are facing tougher challenges, because of the commitment of the Central Bank of Nigeria (CBN) to enthrone corporate governance and accountability. To the CBN, the easiest way to meet regulatory expectations is to adopt and implement sound reporting standards.
    At the G4 Sustainability Reporting Guideline Training, organised by Access Bank in Lagos, the Group Managing Director, Mr Herbert Wigwe, said for a business to be truly sustainable, it must sustain not only the needed environmental resources, but also its social resources, including employees, customers and reputation.
    He said Access Bank has been collaborating with the Global Reporting Initiative (GRI) Focal Point, South Africa, Swedish International Development Cooperation Agency, (SIDA) and Thistle Praxis’ sustainability capacity building in the country.
    He said the workshop was designed to provide participants with the requisite knowledge of sustainability reporting, help them manage the reporting process and benefit from the transparency of adopting such standards.
    “Additionally, the programme provides a strategic opportunity for advancing the shared mission of mainstreaming sustainability reporting into business practices in Nigeria and Africa, as well as enhancing the presence of the Global Reporting Initiative in Nigeria at the national and regional levels,” he said.
    Wigwe, who was represented by the bank’s Chief Risk Officer, Gregory Jobome, said sustainability and responsible business practices are important to the bank and are consistent with its vision of championing and supporting such initiatives across Africa.
    He said the bank’s involvement in certain corporate actions are a testimony to the bank’s sustained efforts at nation building and support for the financial services sector, in achieving a seamless integration of sustainable business practices into the core of its business operations.
    Head, GRI Focal Point, South Africa, Douglas Kativu, urged Nigerian banks and government agencies to improve on standard in the practice of sustainability reporting, given the size and relevance of the country in the global economy, saying these have prompted campaigns that the global community should consistently review business decisions and their environmental impact to make the earth truly sustainable in the long term.
    The Chief Executive Officer, Thistle Praxis Consulting, Ms. Ini Onuk, said the workshop was able to improve participants’ capacity to present sustainability reports in a manner that demonstrates linkages between strategies and commitment to sustainable global economy.
    She said this would help organisations measure, understand and communicate their economic, environmental, social and governance performance accurately, thus making the world become more accountable.

    Stakeholders’ roles
    The GRI Focal Point South Africa works to promote the importance of transparency for markets and better knowledge of sustainability reporting (SR) in key target markets on the African continent, as well as in the Southern African Development Community (SADC) region. It is also committed to building and strengthening sustainability performance and reporting capacity as well as shaping the reporting environment by influencing public policy and market initiatives.
    Also, the SIDA is a government organisation under the Swedish Foreign Ministry that administers almost half of Sweden’s budget for development aid, while the ThistlePraxis Consulting is a Strategy and Assessment Management Consulting firm that assists organisations in all sectors through the delivery of innovative solutions from effective strategies.

    International Finance
    Corporation (IFC) partnership
    Access Bank Plc, International Finance Corporation (IFC) and other signatories of the Nigeria Sustainable Banking Principles (NSBP) last year advocated a holistic implementation of the policy in order to contribute to the development of the economy.
    The stakeholders noted the need to encourage knowledge and experience sharing among industry players, and other international organisations if the objective of the NSBP is to be achieved.
    According to the Chairman of the committee, Jobome “the conference was convened to foster a holistic implementation of the NSBP by encouraging knowledge and experience sharing among industry players and other international organisations, like the IFC and Sustainable Finance Limited.”
    He explained that the bank’s objective as the Chair of the NSBP Steering Committee, and Co-host of the event, is to encourage practices that would aid the actualisation of the objective of the committee in ensuring the successful implementation of the Nigeria Sustainable Banking Principles across Nigeria’s financial institutions.
    He said the NSBP was also developed for the banking sector to signal the industry’s commitment to economic growth that is environmentally responsible and socially relevant, noting that the bank has successfully embedded sustainabi-lity into the core of its operations by initiating capacity development of its employees. This, he said, would ensure that all staff understood what sustainability means.

    Regulatory backing
    The CBN and Nigeria Deposit Insurance Corporation (NDIC) have provided regulatory support and framework for the sustainable banking practice in the country.
    For instance, Special Adviser to the CBN Governor on Sustainable Banking, Dr. Aisha Mahmood, said plans by the regulator to institute nationwide Biometric Solution for the financial system would be a game changer for the industry.
    She told The Nation the CBN has been making steady progress on how to get more people into the financial system especially with the institution of the agent banking model, adding that the introduction of biometric solution by the apex bank is a right step in achieving sustainable banking practice.
    Mahmood said the facility is also expected to help those who are not educated to use biometric to be part of the payment system.
    She said with the biometric solution, the CBN, banks, the Nigeria Interbank Settlement System (NIBSS) and banks’ branches will be connected to the facility when it takes off.
    The CBN assured that the biometric exercise will not interfere, or be in competition with the National Identity project, but instead, it would be rolled into the National Identity project.
    The benefit of the biometric exercise were listed to include helping boost Nigeria’s image internationally, deal with money laundering, deal with fraud, extend credit to people without worrying about where to find them and who they are.
    According to the CBN, the platform, when completed, would help operators and regulators of the financial system address issues of Know Your Customer (KYC), anti-money laundering (AML), and access to credit. This will help fast-track use of channels, such as biometric Automated Teller Machines (ATMs) and Point of Sale (PoS) terminals, among others.
    The CBN and NDIC want banks to shift focus from profitability alone and consider also other issues around sustainability, before lending.
    The United Nations Environment Programme (UNEP), through its UNEP Financial Initiative on the Environment and Sustainable Development at the Earth Summit in 1992, placed it as pertinent concern for financial systems across the world.
    It said sustainable banking in Nigeria, therefore, is focused on energising the influence of the banking sector (being financier of economic and social activities) towards transforming the longer term interest of environmental preservation and societal balancing into key parameters for allocation of capital.

    Oil companies
    The CBN said if the oil companies that degrade the environment and their cohorts in other sectors are starved of funds from both local and international banks, they will have no choice than to comply.
    For the apex bank, there is urgent need for a policy ensuring that people do not carry on their businesses in an environmentally unfriendly manner and get away with it. It said the agenda would be presented to the Bankers’ Committee to agree on the way it can be realised. The reason is that as an industry, banks cannot continue to take savings and deposits from Nigerians and then, lend to companies that are destroying the environment.
    “Why must Nigeria bring multinational oil companies to destroy our environment? How do we feel about it? They can get the funds and still use it in a responsible manner. I want to see more banks coming to identify with issues of sustainability and protection of the environment,” it said.
    The CBN said banks should not just look at profitability of lending decisions, but should also consider contributions of the borrower to the environment.
    For the regulator, competition in the sector has drastically risen, compared with what was obtainable in the 80s. It therefore admitted that the policy may be stalled by banks not wanting to lose businesses to competitors that care less about the environment, where a borrower has not adhered to set standards.
    It explained that global environmental impact of businesses, which are largely financed by the banking industry suggests that the sector has not given adequate attention to environmental impact of their funding activities. It said the tendency to view banking as an environment friendly business is commonplace as it seemed, on the surface, not to be harming the environment and society directly.