The Nation Newspaper

Tag: Nigerian banks

  • Between Nigerian banks and Chris Ngige

    Between Nigerian banks and Chris Ngige

    “Even if you are going to lay off, there is a way to declare redundancy,             
     there is a process. Section 20 of the labour act says it. You must call the           
    unions and discuss with them. You don’t just treat them as slaves in their           
    own country and you want us to keep quiet.”- Dr Chris Ngige

    So the banks have been laying off staff, in droves. Inevitable and predictable, one would say. Any attempt to clean up the financial system drunk on illicit funds, even at the macro level, and keep Nigeria to the narrow path will definitely rebound on a banking system whose substructure lies in quicksand. That is inevitable. Yet, we are only scratching the surface. Underneath, the rot lies much deeper.  Predictably too, the cowboys, who lay claim to ownership  of the banks have taken to the path of least resistance – send home staff whose wages, when added up, barely make any impact on the cooked bottom-line of these institutions.

    In many of the banks, Directors’ remuneration alone, not to mention other benefits and loans to entities in which they have interest, is more than the combined salaries and wages of all the Staff. You would think that banks that are sincerely keen on cutting cost will look at curbing the waste at the top, and not in pushing out the already marginalized people at the bottom. But that will be where the banks care for anyone and anything but their own insatiable greed.

    Understandably, the Minister of Labour and Employment, Dr. Chris Ngige, last week intervened in a bid to keep the process of retrenchment, in line with the laws of the land. He was reported to have threatened a revocation of licences of the banks for violating directives he had issued. He is right, but also wrong. He is right to be concerned but is wrong to issue a threat that holds no water. If he had been properly informed, he would have realized that the rules he is throwing at the banks hardly apply to most of them. He would have realized the futility of his threat as most of the banks in question do not have in-house unions and are not bound by those rules.  Indeed, that is the problem. That is what should be of concern to the Minister. For without tracking back to the point where the rain started beating us, we would only labour in vain, in the present.

    Banking has almost, always, been borderline criminality. To put it mildly, what transpires in many of the banks, pretending to be legitimate enterprise, is bare-faced criminality.  Indeed, it did not start today but it was never as blatant as it has been in the last two decades or thereabout.

    Fast forward to the late 1980s and early 90s with the liberalisation regime of General Babangida and the open-house banking system that came courtesy of the new-generation banks, things changed. With all the good brought into the system by virtue of competition and massive adoption of technology, there were downsides to new-generation banking. Apart from the institutionalisation of greed as official creed in banking, it ushered in the era of complete disregard for labour laws.

    So, in telling the banks to follow due process, the Labour Minister might be right. Only that he is very late to the party, the train left the station way back. Too late in the day to be issuing directives to banks that had carefully guaranteed an emasculation of the workforce. What operates in terms of labour practice in many of the banks is barely different from what it was like in the sugarcane plantations of old. It is only another face of the legalised robbery pretending to be banking in Nigeria, where profits, so-claimed, are privatised and losses, so-declared, are socialised – passed on to the rest of us, so the big boys can continue to luxuriate, while fashioning new means at legitimising rogue banking.

    A million directives will not make a difference to a system rotten from the substructure. The banks simply don’t care about staff, customers, investors or the public. They only care about the books and how to cook them. Perhaps, soon, someone will make them care about what should really matter.

     

    • Simbo Olorunfemi works for Hoofbeatdotcom, a Nigerian Communications Consultancy.

    Tweet@simboolorunfemi

     

     

  • What we don’t like about banks

    What we don’t like about banks

    So you have been working all day, and just out of intuition, you check the time and you realize it’s just about 20 minutes before your bank’s official closing hours. Ideally, it should not take more than 10 -15mins to finish your transactions, but because of financial and sometimes self-inflicted bottlenecks, you can’t make it. Well, asides from this here are a list of those things, most people don’t like about the Nigerian banking system.

    Bank charges

    Can you remember the first day you got a message about ATM maintenance fee? I bet you had the same reaction as mine. The only question I had on my mind that day was “Are they oiling my card or cleaning it for me in my dreams?” like seriously? Why should we pay for ATM maintenance?

    As if the above ATM fund stealing is not enough, the new CBN rule of 65 naira deduction is another very annoying thing we customers wish they could scrap. It’s not every time your bank ATM centers work, neither is it everyone that has their bank in close proximity to their house or place of work.

    I think the worst of all in all these charges is the fraudulent SMS charges. Yes fraudulent because they even charge dormant accounts money for giving bank statement that haven’t changed in months. As such they clear out your account without you knowing. Also with all the money they are making why are they charging us for sending alerts, as far as we customers are concerned the SMS alerts should be free. It’s the least they can do for us.

    Long queues

    I asked a friend last week “What do you hate most about banks?” She said “They have more customers than their capital and manpower; they can’t cater for the large crowd they desperately seek for.” Which is very true, there’s no month that goes by that doesn’t bring a bank marketer my way trying to convince me to open an account with them. I have so many banks accounts that I’m not using. The only thing connecting me to them is the monthly emails they send to me.

    This trend would have been forgivable of banks if they could accommodate us all, but unfortunately reverse is the case. Every time we visit banks, we always meet extremely long queues. I always laugh at my brothers expression each time he is sent to go pay money into the bank. You would think his whole world has come crashing down.

    Non functioning ATMS/ Bad ATM Service

    The automated teller machine at its inception was considered revolutionary in the country. It was supposed to be a life saver, well from the above ordeal of course. Unfortunately our ATMs haven’t lived up to expectation. I have visited several bank ATM centers with numerous ATM machines, that have only one machine functioning. Why have so many machines when you can only maintain one. As such the queues that the ATMs were supposed to alleviate are created at these centers. As if this is not enough, after queuing for so long, you get to the machine and “boom” it reads “temporarily unable to dispense cash”.

    This has to be the worst feeling ever. And sometimes that ruins everything the more it debits your accounts and it takes you weeks and sometimes months to get refunded. I guess this is the worst

    Poor Customer Service

    I think with all these issues, banks would have been more accommodating if they had nice and approachable staff rather than the usual “bored, grubby and frustrated” ones we see. You queue for so long only to meet a frowning cashier. You have an issue with your ATM card only to meet disinterested staffs who give you the “Can you not disturb my life” face.

    I’m sure am not the only one that hates these. I pray banks improve on these.

     

     

     

  • Why Nigerian banks, entrepreneurs should work mutually

    Entrepreneurs occupy a central position in any market economy. They serve as the spark plug in the economy’s engine, activating and stimulating all economic activities. A society is prosperous to the degree to which it rewards and encourages entrepreneurial activities because it is the entrepreneurs that determine the level of success, prosperity, growth and opportunities in any economy. This is reason countries go to great lengths to promote entrepreneurs.

    Entrepreneurs also need the banks for expansion, hence their relationship is mutual for continued creation of employment, provision of goods and services and deepening of the economy. A commercial bank grants loans and extend credits to reliable customers based on agreed terms, and it’s from such loans that banks also make income. Thus, banks specialise in assessing the credit worthiness of borrowers and providing an ongoing monitoring function to ensure borrowers meet their obligations. It is somewhat difficult to measure the impact of banks financing in providing support for entrepreneurs in Nigeria.

    However, there have been some success stories and leading lights that signpost Nigeria’s entrepreneurial spirit. Aliko Dangote owns the Dangote Group, a conglomerate with interests that cover food processing, cement manufacturing, and freight. The company operates in Nigeria and other African countries, including Benin, Cameroon, Ghana, South Africa, Togo, Tanzania, and Zambia. The Dangote Group employs over 11,000 people.

    Oba Otudeko, an astute and highly successful investor and entrepreneur also owns Honeywell Group, which has invested in diverse sectors of the economy since its inception in 1972. It has grown to become one of Nigeria’s leading indigenous conglomerates. The Honeywell Group is now a major diversified group in key sectors of the economy including foods and agro-allied business, oil and gas, power, infrastructure, services and real estate.

    Through other portfolio investments, the Group has become a significant provider of capital to other sectors of Nigeria’s economy. Honeywell Group employs over 10,000 people. In the services sectors, Jim Ovia and Tony Elumelu stand out. Ovia is the promoter and founder of Visafone and was a co-founder of Zenith Bank Plc while Tony Elumelu is the Chairman of Heirs Holdings, the United Bank for Africa, among others.

    These entrepreneurs have at certain times enjoyed and continue to enjoy the support of the Nigerian banking and financial system through loans and credits.

    As businesses managed by human beings, with numerous risks inherent in commercial and contractual transactions, disputes are often inevitable. It is in view of this that the Bankers’ Committee created a sub-committee on “Ethics and Professionalism” to address customer complaints and disputes arising from banking practices.

    The Bankers’ Committee is an umbrella body comprising the Central Bank of Nigeria and commercial banks. The sub-committee has resolved over 1000 cases/petitions since its establishment in December, 2000. Therefore, the case between Ecobank and Honeywell shouldn’t be irresolvable.

    Ecobank and Honeywell had transaction conflict, which resulted in litigation. Court proceedings as instituted by both parties revealed that Honeywell Group through three of its companies (Anchorage Leisure’s Limited, Siloam Global Services and Honeywell Flour Mills) obtained various banking facilities from Oceanic Bank. These facilities were subsequently inherited by Ecobank Nigeria Limited upon its acquisition of Oceanic Bank.

    Due to various factors within established norms of banker/customer relationships, Honeywell Group, in 2012, commenced discussions with Ecobank for a full and final settlement of its obligations to the bank. At a meeting in July 2013 between the two organisations, which was led by the Group Executive Director, Honeywell Group, Oba Otudeko on one hand and the Managing Director/CEO of Ecobank, Jubril Aku on the other hand, an agreement was reached for the payment of N3.5 billion in full and final settlement of Honeywell’s indebtedness to Ecobank.

    An initial and immediate good faith payment of N500 million was made and a balance of N3 billion paid subsequently, making a total of N3.5billion paid in accordance with the agreements reached.

    Ecobank duly acknowledged the cumulative payment of N3.5 billion in a letter dated February 2014 and agreed to update its records with the credit registry. Surprisingly, nine months after payment was effected, Ecobank informed Honeywell that it did not obtain board approval for the agreement. This feedback was obviously not acceptable to Honeywell as the agreement was reached with the Managing Director of the bank, who ordinarily should be able to bind the bank on agreements of such nature and further documented in numerous correspondence. This thus became a basis of dispute between Honeywell Group and Ecobank as it was clear to Honeywell that it had fulfilled its obligations to Ecobank based on agreements reached.

    The dispute was submitted to the Bankers’ Committee, Sub-Committee on Ethics and Professionalism and a ruling was issued by the committee in July, 2015 to the effect that “the agreement between Honeywell Group and Ecobank to pay N3.5 billion as full and final payment of the borrowers’ indebtedness is valid and should be complied with.”

    Ecobank till date has not adhered to this ruling. Both parties have filed suits at the Federal High Court with respect to the matter.

    The Head, Legal and Regulatory Affairs of Honeywell Group, Mrs. Yemisi Busari said: “We have been surprised by the actions of Ecobank, which have been very inconsistent and short of the standards expected of a bank of its standing. In our opinion, there was a valid agreement to pay a sum in full and final settlement of our obligations and we have met our part. Independent third parties have also attested to this fact. Are Managing Directors of banks no longer recognised agents, able to bind their organisations to agreements? Why did it take the bank nine months to realise they didn’t have board approval for their Managing Director’s actions? Does Ecobank, which subjected itself to the hearing by the Bankers’ Committee, Sub-Committee on Ethics and Professionalism, not believe it is accountable to the Bankers’ Committee, because the ruling was not in their favour? What is the objective of the bank in making multiple filings before different judges in the same Federal High Court?

    “As stated earlier, this dispute will no doubt raise serious concerns in the minds of most entrepreneurs in Nigeria as funding from banks is critical to the running of most businesses. Will the banks respect the sanctity of agreements reached with their customers? What recourse is available to entrepreneurs when banking standards and decisions are not adhered to? How is compliance to standards and codes enforced in the banking industry?

    Without a resolution of the issues highlighted above, entrepreneurship will gradually become stifled and the impact on the budding Nigerian economy may be colossal.”

    • Lawal is public affairs analyst in Lagos
  • Nigerian banks more exposed than Russia’s to oil slump

    Nigerian banks more exposed than Russia’s to oil slump

    First Bank and Guaranty Trust Bank Plc are among banks with the most at stake as tumbling oil prices strain Nigeria’s economy.

    Oil companies account for 25 per cent of bank lending in Nigeria, Olalekan Olabode, an analyst at Lagos-based Vetiva Capital Management Ltd., told Bloomberg. Among the three largest Russian banks, OAO Sberbank relies on the industry for 2.2 per cent of loans, VTB Bank OJSC 8.1 percent and Gazprombank OJSC 16 percent, company filings show.

    “The outlook for Nigerian banks is very linked to what happens to oil prices,” said Adesoji Solanke, a banking analyst at Renaissance Capital Ltd. “Oil prices have significant economic implications for Nigeria, which eventually feed through to the banks.”

    Nigeria derives almost all export earnings and 70 per cent of government revenue from oil. The price of Brent crude has dropped more than 40 percent this year to the lowest since May 2009, prompting Finance Minister Ngozi Okonjo-Iweala to propose an 8 percent budget cut on December 17. The Central Bank of Nigeria (CBN) raised interest rates to a record last month to protect the naira.

    The Nigerian Stock Exchange Banking Index has dropped 30 per cent this quarter, reflecting investor concerns that petroleum companies may struggle to pay debt. Non-performing loans will climb to between five per cent and 10 percent by the end of 2015 from less than 3 percent now, Fitch Ratings Ltd. said.

    The country’s lenders form sub-Saharan Africa’s biggest banking industry after South Africa, with about $155 billion of assets, according to Exotix Partners LLP. Banks with the greatest reliance on the energy industry at the end of September were FBN Holdings Plc (FBNH), owner of First Bank, Guaranty, the biggest lender by market value, and Skye Bank Plc, said Olabode at Vetiva Capital.

    While oil producers’ earnings could be eroded by reduced income from sales of crude, the depreciation of the naira, which has fallen 11 per cent against the dollar this quarter, also makes it more expensive for fuel suppliers to pay for gasoline imports. Nigeria only has refining capacity to meet 30 percent of demand.

    “The sliding oil price poses a threat to banks’ performance as asset quality deteriorates amid a tougher operating environment,” Olabode said.

    Nigeria’s banking index has declined 34 per cent since the end of 2013. South Africa’s banks have risen by a weighted average of 19 per cent, while Abu Dhabi’s lenders have climbed 11 per cent, according to data compiled by Bloomberg.

    First Bank has structured its oil loans, which form 40 percent of its portfolio, so that they can be serviced “at prices well below current market rates,” said Chief Risk Officer Abiodun Odubola. Guaranty’s lending to the oil industry has dropped from 28 percent to 22 percent since the end of September, spokesman Lashe Osoba said. Skye, which has almost a third of its loans with petroleum companies, doesn’t expect defaults to increase at current prices, said spokesman Rasheed Bolarinwa.

  • 13 Nigerian banks among top 1000 world lenders

    13 Nigerian banks among top 1000 world lenders

    Thirteen Nigerian banks have been lifted among the world’s 1,000 lenders.

    Influential magazine  The Bankers  stated this in its 2014 edition on the review of banks and their performance.

    According to the report, the banks are in attaining the feat in their second year.

    The Country Representative of the magazine, Kunle Ogedengbe, listed the 13 banks that made the ranking, which he said is based on Tier-1 capital, as Zenith Bank, Guaranty Trust Bank, First Bank, Access Bank, United Bank for Africa, Fidelity Bank and Ecobank Nigeria.

    The others are: Skye Bank, First City Monument Bank, Diamond Bank, Stanbic IBTC Holdings, Standard Chartered Bank and Union Bank.

    Zenith Bank is ranked top in Nigeria at 293. GTB is next on number 415.  First Bank  and Access Bank stand at  number 424 and  532.  United Bank for Africa is ranked 539. Fidelity occupies the 622 spot.

    The Banker said profit on capital of three Nigerian banks that are not foreign-owned subsidiaries increased. These are First Bank that has its profit on capital increased to 25.32 per cent from 25.13 per cent, Access Bank, from 21.19 per cent to 21.24 per cent  and First City Monument Bank, 15.77 per cent from 15.07 per cent.

    The magazine said the share number of local banks that made the ranking, “underlines Nigeria’s number one position in Africa, as no other African country has up to 13 in the Top 1000 World Banks.”

    It said the 13 Nigerian banks along with their global counterparts, “for the first time since the global financial crisis, returned profit of $920 billion which is 23 per cent  more than their previous peak of $786 billion achieved in 2007 before the financial crisis,” that reverberated across the financial centres of the world, that crippled the economies of many European countries and was a major campaign issue in the US Presidential election that saw Barack Obama elected as the first Black US President.

    The Editor of the magazine, Brain Caplen, explained that the 23 per cent increase in profit of global banks from 2007, “is good news,”  but pointed out that “the better news is that capital has also increased at a reasonable pace, whereas assets have stayed flat. This means that returns on capital are only slightly improved but the hope is that this upturn is more sustainable than the last one,” he added.

    Mr. Caplen disclosed that a large proportion of the profit is from China – about 32 per cent of the total which is more than the next three highest profit countries of USA, Japan and Canada combined.

    Of the 25 top banks in Africa from the ranking, the highest of eight is from Nigeria, the largest economy in the continent while the United Bank for Africa is the only Nigerian bank in the top 10 highest movers in Africa.

    In all, Africa has 31 banks in the Top 1000 World Banks 2014 with Nigeria having 13 representing 41.94 per cent. The 31 African banks in the ranking are from nine countries: Nigeria, South Africa, Egypt, Angola, Gabon, Kenya, Mauritius, Morocco and Togo.

    Globally, Senior Editor of the magazine, Philip Alexander stressed that banks in this 2014 ranking “are stronger than ever” as “the level of capital held by banks in this ranking continues to accelerate, with the minimum Tier 1 capital required to enter the Top 1000 World Banks now fast approaching $400m. This has almost doubled since the 2005 ranking”, he added.

    The Banker, a publication of Financial Times Newspaper which is regarded as the most influential newspaper in the world, is a global financial intelligence magazine published since 1926. It is the definitive publication that provides guide to bank ratings and analysis globally and the definitive reference on international banking for finance experts, governments, chief finance officers, CEOs, Central Bank Governors, Finance Ministers, and other decision makers globally.

    According to The Global Capital Markets Surveys (GCMS), the only independent media benchmarking study available in the capital markets industry and provides insight into who reads what at the world’s financial institutions, amongst monthly finance titles globally The Banker is number one monthly finance title read globally, in capital markets; Europe, Middle East and Africa (EMEA) region; emerging markets and bank as well as financial institutions in the world.

  • Nigerian banks’ earnings grow by 60% to N2tr

    Nigerian banks’ earnings grow by 60% to N2tr

    Nigerian banks grossed N1.85 trillion in the third quarter of this year, indicating an increase of 59.6 per cent over N1.16 trillion recorded in the second quarter. Banks’top-line earnings were, however, still 33.2 per cent short of the industry’s net assets.

    The Nation’s Intelligence Report showed that banks’net earnings improved by 45.4 per cent while industry’s shareholders’ funds rose slightly by 6.7 per cent. The report covered all quoted banks, excluding the troubled Wema Bank, which has been in default of periodic release of results, which will not change the industry’s figures.

    Industry’s average return on equity improved from 10.05 per cent in the second quarter to 13.7 per cent in the third quarter, a double-digit position that underlines the fundamental attractiveness of banks’ shares. Six banks performed above industry’s average return on equity.

    Notwithstanding the substantial growth in gross earnings, banks were still relatively underperforming their innate capability with top-line earnings just two-thirds of shareholders’funds.

    Total industry’s profit after tax stood at N378.52 billion while shareholders’ funds was N2.76 trillion compared with N260.27 trillion and N2.59 trillion recorded in the second quarter.

    The earnings of quoted banks are significantly important to the Nigerian stock market, where they dominated the capitalisation and activity charts. Banking subsector accounts for more than two-quarters of market capitalisation and to a large extent, dictate overall market condition.

    Nearly all banks witnessed increase in key performance indices of top-line earnings, net earnings and net assets but the income structure and bottom-line still reflected the overt caution in an industry just recovering from a devastating assets bubble and balance sheet impairment.

    Most analysts expect banks to further consolidate their performances in the fourth quarter, although caution remain about the lightning bolts that had characterised some previous fourth quarter results.

    Bank-by-bank analysis showed that First Bank of Nigeria (FBN) Plc maintained the lead with the largest top-line earnings and net profit after tax. Ecobank Transnational Incorporated (ETI) has the second largest top-line but ranked fifth in net profit while Zenith Bank has the third largest gross income but the second largest profit after tax.

    United Bank for Africa(UBA) posted the fourth highest gross income while Access Bank and Guaranty Trust Bank ranked fifth and@ sixth. Diamond Bank moved up to the N100 billion and above bracket to occupy the seventh position.

    Guaranty Trust Bank (GTBank) was the best-return bank with the highest return on equity of 23.40 per cent while UBA posted the second best return on equity of 18.52 per cent.

    In net assets, Zenith Bank led the industry with N421.31 billion. It was trailed by First Bank of Nigeria with N414.08 billion. ETI placed third with N305.13 billion. GTBank ranked fourth at N269.37 billion while Access Bank, Union Bank of Nigeria and UBA recorded N241.30 billion, N212.55 billion and N211 billion.