The Nation Newspaper

Tag: lending

  • 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.

  • UBA grows lending to N1.1tr in Q1

    United Bank for Africa (UBA) Plc stepped up lending to various sectors across its pan-African operations in the first quarter as the bank grew loans and advances by 16 per cent to N1.1 trillion.

    Interim report and accounts of UBA for the period ended March 31, 2014 released yesterday showed that the bank further expanded credit support to the emerging sectors in Nigeria and Africa with its loans and advances hitting a new record high.

    UBA’s loans rose by 16 per cent from N937.6 billion by December 31, 2013 to N1.067 trillion by March 31, 2014. Gross earnings had risen by 8.2 per cent to N68 billion in 2014 compared with N63 billion recorded in the corresponding period of 2013.

    Quarter-on-quarter, profit after tax rose by 36.37 per cent from N9.23 billion by December 2013 to N12.59 billion in the first quarter of 2014. Net interest margin , which shows the quality of the bank’s earning on its lending activities, remained stable at 5.9 per cent. Cost of funds also remained stable at 3.6 per cent while return on assets remained stable at 1.9 per cent. Return on equity improved to 22.1 per cent from 21.3 per cent.

    The report showed operating income of N45.5 billion within the first three months of this year, a marginal increase on N44.6 billion in the first quarter of 2013.

    Commenting on the results, group managing director, United Bank for Africa (UBA) Plc, Mr. Phillips Oduoza, said the bank has focused on a number of strategic initiatives aimed at increasing its market share in the Nigerian and African markets.

    “We are optimistic that the gains of our improved electronic banking channels and financial inclusion initiatives will materialize in successive quarters during the year. We remain confident that we have the right tools to achieve our business goals for the year whilst ensuring we continue to improve our customer service delivery and further consolidate our growth momentum,” Oduoza said.

    According to him, the UBA Group remains a highly diversified financial services provider, the leading player in three different markets and controlling significant market share in 19 different African countries.

    He noted that the bank has a strong retail franchise across the continent offering its more than seven million customers a bouquet of products and services tailored to meet their different financial needs.

  • Banks’ lending to economy rises to N15tr

    Banks’ lending to economy rises to N15tr

    Banks’ lending to the domestic economy rose by 0.5 per cent to N15.1 trillion at the end of January, an Economic Report by the Central Bank of Nigeria (CBN) has shown.

    According to the report released at the weekend, banks’ lending to the Federal Government, on month-on-month basis, equally rose by 13.9 per cent to negative N1.2 trillion, compared with the growth of 37.7 per cent at the end of the preceding month, but was in contrast to the two per cent decline at the end of the corresponding month of 2013. The development relative to the preceding month, reflected largely, the increase in banking system’s holdings of government securities.

    The report said the Federal Government estimated retained revenue in January 2014 was N262.88 billion, while total estimated expenditure was N368.35 billion. Therefore, the fiscal operations resulted in an estimated deficit of N105.47 billion, compared with the estimated monthly budget deficit of N73.92 billion.

    It said crude oil production, including condensates and natural gas liquids in January was estimated at 1.92 million barrels per day (mbd) or 59.5 million barrels for the month. Crude oil export was estimated at 1.47 million barrels per day (mbd) or 45.6 million barrels during the month. The average price of Nigeria’s reference crude, the Bonny Light (370 API), was estimated at $110.19 per barrel, indicating a decline of 2.6 per cent below the level in the preceding month.

    The end-period headline inflation rate (year-on-year), in January 2014, was eight per cent, same as in the preceding month. Inflation rate on a 12-month moving average basis fell by 0.1 percentage point to 8.4 per cent from the level in the preceding month.

    Foreign exchange inflow and outflow through the CBN in January 2014 were $2.54 billion and $4.65 billion, respectively, and resulted in a net outflow of $2.11 billion. Foreign exchange sales by the CBN to the authorised dealers amounted to $4.04 billion, showing an increase of 42.9 per cent above the level in the preceding month.

    Relative to the level in the preceding month, the average naira exchange rate vis-à-vis the US dollar depreciated in all the segments (WDAS, interbank and bureau-de-change segments) of the foreign exchange market. Non-oil export receipts rose significantly by 30.1 per cent above the level in the preceding month. The development was attributed, largely, to the increase in export earnings from the agricultural sector and manufactured products.

     

     

    World crude oil output in January 2014 was estimated at 90.44 million barrels per day (mbd), while demand was estimated at 90.00 million barrels per day (mbd), representing an excess supply of 0.44 mbd, compared with 90.18 and 90.93 mbd supplied and demanded, respectively, in the preceding month.

  • Banks to grow lending by 20%

    Bank loans are expected to rise by 20 per cent within the year, Renaissance Capital (RenCap), an investment and research firm has said.

    In a report, it noted that the Central Bank of Nigeria (CBN) is not in a hurry to ease monetary policy, and its primary concern is to achieve lower inflation and forex stability.

    “Our read of this is that the monetary policy rate (MPR) is unlikely to be reduced by much, while the cash reserve ratio (CRR) is unlikely to be reduced at all,” it said.

    It said about 20 per cent loan growth is consensus guidance for the year, with very few banks anticipating power projects funding.

    RenCap said Nigerian banks excite it most within the Europe, Middle East and Africa (EMEA) banks context in the year.

    According to the firm, its growth expectations for Gross Domestic Product (GDP) of 6.7 per cent, the Nigeria market should benefit from accelerating top-down trends.

    It also said the West to East African banks are also viable performers within the year, with the Kenyan elections a potential headwind.

    RenCap said Equity bank remains its pick of the bunch on a relative basis.

    “Within the liquid space, this could be Russian banks’ year. Although we are more conservative with our outlook for the sector at the start of 2013 than we were throughout 2012, market appetite has begun to rise for risk assets,” it said.

    For South Africa, it said that with GDP growth near three per cent, credit growth slowing to high single digits and margins expected to be stable on flat interest rates big-four South African banks could deliver 10 to 15 per cent Earning Per Share (EPS) growth in the year.

     

  • ‘Lending to SMEs key to growth, development’

    A group, Association of Micro Entrepreneurs of Nigeria (AMEN), said improvement in lending to small and medium enterprises (SMEs) is key to boosting economic growth and development.

    Its President, Prince Saviour Iche, said access to finance remains a key challenge to SMEs and a stumbling block to recovery.

    He said banks and financial institutions are yet to tap into the huge market potential of SMEs’ financing.

    Iche, who spokein Lagos, last week, said although many financial institutions are said to have targeted the SMEs segment, the group was yet to feel the impact.

    He said SMEs lending needs to be driven like any retail product and that the number of bank branches suggests that there is a strong distribution of infrastructure in place.

    He said there is an untapped market for SMEs lending and that bridging the huge funding gap in the small business sector, would aid growth and development of this sector.

    He said SMEs requesting loans faced higher interest rates. Credit conditions continued to be tougher for SMEs as small businesses faced shortened maturities and increased demands for collateral.

    According to him, the business environment continues to be a challenge for SMEs. He explained that SMEs and entrepreneurs are crucial for tracing new paths to more sustainable and growth, adding that their role in developing and diffusing innovation and providing employment. However, they can only fulfil this role if they obtain the finance necessary to start and grow their businesses.

    He said there should be adequate funding for small businesses planning to expand into emerging markets.

    He said there are opportunities for small firms to be involved in international trade and that they lack funding to maximise these opportunities.

    He said SMEs were still being turned down for lending, and that those that get approved said the terms were often prohibitive.

    He said small and medium-sized enterprises account for a significant part of the working population.

    He explained that small firms are employing more Nigerians than large enterprises, and so specific policies are required to improve the situation among SMEs.

    According to him, the higher chance of enterprise growth,the greater the opportunities for job opportunities. He said measures should be put in place to improve the chances of SMEs employing more Nigerians.

  • CBN’s lending facility drops from N6.5tr to N1.1tr

    The Standing Lending Facility (SLF) of the CentralBank of Nigeria (CBN) has dropped from N6.5 trillion to N1.1 trillion.

    Its fall followed the rising liquidity in the system and CBN’s restrictions on the discount window.

    SLF was N1.1 trillion in the fourth quarter of last year, compared to N6.5 trillion in the previous quarter.

    SLF is an overnight fund provided by CBN to support bank’s liquidity.

    The weighted average interbank call rate, which stood at 15.50 per cent in September fell to 11.72 per cent, reflecting improved liquidity condition in the interbank funds market.

    The SLF is granted to banks at 14 per cent in line with the Monetary Policy Rate (MPR). It is available only to banks and discount houses that have executed the Nigerian Master Repurchase Agreement (NMRA) with the banking watchdog.

    The apex bank had stipulated that discount window operations in overnight facilities will be backed by borrower-holdings of the government debt instruments and other eligible securities approved by the bank.

    It said banks, while computing their cost of funds, should employ the weighted average cost of funds computation framework. The applicable cost items will include banks’ interest cost on the different types of deposit liabilities, borrowings from the inter-bank funds market, payments in respect of deposit insurance premium and costs due to reserve requirements. These restrictions have affected banks’access to SLF in the last quarter.

    In its Economic Report for the last quarter that the monetary policy rate, Cash Reserve Ratio (CRR) and liquidity ratio were maintained at their previous levels of 12, 12 and 30 per cent.

    The Net Open Position (NOP) was also retained at one per cent; money market indicators, particularly short tenored instruments were relatively stable. The bank’s discount window also remained open to authorised dealers to access both the standing deposit facility (SDF) and SLF.

    The value of money market assets outstanding stood at N6.2 trillion, an increase of 3.1 per cent, compared with 3.6 per cent recorded at the previous quarter. The development was attributed to the 5.2 per cent increase in FGN Bonds outstanding.

    At N1.6 trillion, currency in circulation rose by 21 per cent, in contrast to a decline of 1.1 per cent at the end of the preceding quarter. The development was attributed, largely, to the 21.6 per cent rise in currency outside the banking system.

    Total deposits at the CBN amounted to N7.3 trillion, indicating an increase of 6.9 per cent, compared with 6.2 per cent at the end of the preceding quarter. The development reflected the 7.5, 14.6 and 5.7 per cent increase in the deposits of DMBs, private sector and Federal Government.

    Consistent with the trends in DMBs’ deposits with the CBN, reserve money (RM), increased by 13.3 per cent to N3.5 trillion, from N3.1 trillion at the end of the preceding quarter.

    Available data from the National Bureau of Statistics (NBS) showed that estimated gross domestic product (GDP) grew by 7.1 per cent, compared with 6.9 per cent in the preceding quarter. The development was attributed, largely, to the increase in the contribution of the non-oil sectors, particularly the industrial sector.