FBN Holdings Plc. yesterday reported a dip of 82 per cent in profit after tax (PAT) for the year ended December 31, 2015, falling to N15.1 billion, from N84 billion in 2014. The bank was among those that had sent profit warnings to the stock market community, saying its earnings would be materially below 2015 levels as a result of the recognition of impairment charges on some specific accounts resulting from a reassessment of the loan portfolio within our commercial banking business.
According to its audited results released yesterday, FBN Holdings recorded impairment charges of M119.3 billion, up from N25. 9 billion in 2014. Consequently, its PAT dipped to N15.1 billion, although it recorded gross earnings of N505.2 billion, up from N481.8 billion in 2014.
In its unaudited results for the first quarter ended March 31, 2016, FBN Holdings posted gross earnings of N107.5 billion, compared with N126.8 billion in 2015. PAT stood at N20.7 billion, as against N22.6 billion in the corresponding previous of 2015.
Commenting on the results, the Group Managing Director of FBN Holdings, UK Eke, said:
“This has been a very difficult time in the history of our institution. Despite the tough macroeconomic and regulatory backdrop during the year, our underlying business remains strong as reflected in the gross earnings growth of 4.9 per cent to N505.2bn clearly a leading position in the industry. Furthermore, the Holding company platform has provided support in mitigating the impact of credit losses and the vulnerabilities experienced by our Commercial Banking business.
“In coming periods, our primary focus is to drive efficiency and operational excellence across all operating companies. Key initiatives in achieving this, as we eliminate the value eroding factors and seek to reposition the Group towards a new growth path, include: enhanced focus on moderating risk appetite, risk management practices and culture; disciplined cost containment; asset optimisation; and, synergy realisation. We will be sustaining the drive to improve cross sell initiatives, improve performance and returns from our subsidiaries to provide diversified and sustainable revenue for the Group. Whilst acknowledging the challenges facing the Group, we are committed to achieving our set tasks. Amongst those, one priority stands out above all else-the need to restore shareholder value whilst building long-term sustainability into our businesses”.
United State Federal Reserve policymakers are expected to hold interest rates steady when they meet this week, but may tweak their description of the economic outlook to reflect more benign conditions, leaving the path open for future rate rises.
The Fed raised its policy interest rate last December for the first time in a decade when market volatility finally subsided in the wake of a scare over China's economy.
Similarly early this year, markets wobbled on worries about a slowdown in global economic growth and weak U.S. corporate earnings, leading to expectations for further Fed rates rises to be revised down, so Fed policymakers may be wary of this week sending too strong a message of an imminent policy tightening.
Many Fed officials remain spooked by the steep stock market drop earlier this year and by weak first-quarter U.S. economic data. Concrete signs of higher inflation and growth may be needed before the FOMC, the Fed's policy committee, continues with the projected gradual path toward more normal levels of interest rates.
Though the U.S. economy is generating jobs and consumer prices have risen, providing support for a Fed interest rate rise, weakness in retail sales and international trade, as well as concern about China's economy, are among reasons Fed Chair Janet Yellen will stay cautious about further rate hikes before the second half of the year.
Markets have already anticipated such an approach, seeing no chance of a rate increase at this week's meeting on April 26-27 of the Federal Open Market Committee (FOMC), and are pricing in just a one in five chance of a move at the next meeting on June 14-15. Reuters polling of market participants sees two rate hikes this year.
"I don't think they can pull off a June hike without triggering another round of volatility, and they don't want that because the selloff in January and February left a deep scar," Aneta Markowska, chief U.S. economist at Societe Generale, said in New York.
"The FOMC can't go too hawkish overnight because markets aren't pricing in anything close to that."
Last week the European Central Bank held its policy rates at historic lows and while the Fed is also set to stand pat for now, its policymakers will not stay silent for too long as markets are pricing in barely one rate hike this year, compared with the Fed's view that two will probably be appropriate.
Last October, when stock markets had recovered from a sharp selloff and as fears of a slowdown in China's economy were receding, the Fed specifically cited the "next meeting" as possible for a policy move. In December they followed through, raising rates for the first time since 2006.
Fast forward to April this year and the Fed is experiencing deja vu.
After a volatile couple of months, stocks have rebounded and financial conditions have eased as expectations for China's economy again improved.
A firm of financial analysts, Proshare Nigeria, has stated that Skye Bank Plc. may experience reduction in its earnings for the 2015 financial year.
This came a few weeks after the lender issued a profit warning, informing its stakeholders of a possible decline in its bottom line.
According to Proshare, Skye Bank's expensive acquisition of Mainstreet Bank and the high cost of integration of its Information Technology platforms and processes will also drive up its operating expenses as reflected in its high cost-to-income ratio which was put at above 70 per cent as of the third quarter of 2015.
Explaining further, the financial analysts said the bank had noted in its profit warning that the growing bad loans in oil and gas and real estate sectors hit its operations considerably.
Proshare said deductions from recent audited reports of a few of the banks presented so far indicated that the average turnover growth stood at 12 per cent and profit margin of 16 per cent with an attendant surge in impairment charges and bad loans
In its publication titled, "Why investors should expect contained earning in 2015 result" published on its website, Proshare said the effects of some government policies such as the public sector funds freeze would lead to loss of trading revenues for banks, among others.
"The bank will have to deal with its significant exposure to an elongated commodities-price slump that has sparked defaults for it in the oil and gas, power and real estate sector(s)," the report published by the analysts said.
The financial analysts envisaged that 26 per cent of total loan portfolio of the bank in the third quarter of 2015 was in oil and gas while the same troubled sector owns 28 per cent of total non-performing loans (bad debts) as revealed in its Q3'15 result.
It said the oil price slump had made it significantly difficult for risk assets in the sector to perform.
"The challenge for the bank as for virtually all the banks in this risk adjustment crisis must relate to how they treat/recognise the underlying assets that collaterised both the loan and the cash flows thereon," it said.
The Securities and Exchange Commission has said it will leverage on the support of the Nigeria Police Force and other law enforcement agencies in its quest to checkmate errant players in the country's capital market.
It, therefore, urged law enforcement agencies to collaborate with it in the mission to ensure zero tolerance for infractions and also ensure that perpetrators of fraudulent acts were brought to book appropriately.
The Director-General, SEC, Mounir Gwarzo, stated this when he led members of the management of the commission on a visit to the Inspector General of Police, Solomon Arase, in his office in Abuja on Monday.
Gwarzo solicited the support of the IGP to enhance the ongoing co-operation between the Force and the commission towards ensuring that laid down rules and procedures were adhered to in the capital market.
He appreciated the police on the work being done since the collaboration started and sought for more in the areas of specialised discipline such as forensic investigation to enhance the operations of the capital market.
In his response, Arase assured the Commission that the Nigerian Police under his leadership would do all that it could to assist SEC in ensuring that infractions in the capital market were brought to the barest minimum.
He commended the DG SEC on his desire to make the capital market free of malpractices, saying that no nation could develop with the increase in crime and corruption, adding that life and property, including tangible and intangible assets, must be protected.
Investment banking and financial services group, United Capital Plc., has announced its 2016 Q1 profit before tax of N1.42bn, up from N0.89bn in Q1 2015. This represents a 59 per cent increase.
Its gross earnings stood at N1.85bn, up from N1.30bn in Q1 2015, representing a 42 per cent increase from the previous year.
The firm's profit after tax also grew by 61 per cent in Q1 2016, closing at N1.13bn, up from N0.71bn in 2015.
The company also held its Annual General Meeting in Lagos and declared a 35 kobo dividend to shareholders.
The group said despite the extended economic challenges in the market in 2015, it exhibited sustained growth throughout last year (reported 2015 full year earnings of N6.15bn, up from N4.68bn in 2014) and in to 2016.
Commenting on the results, the group's Chief Executive Officer, Oluwatoyin Sanni, said, "We entered the new year with a full understanding of what was ahead of us. Therefore, we prepared for and anticipated the roadblocks and adjusted accordingly.
"We adopted a group-wide operational approach of 'effectiveness and efficiency' in delivering superior services to our clients in order to achieve our goals. We believe this will help us maintain sustained growth through the remaining quarters of the year."
The company said its Q1 performance confirmed that it remained well positioned to play a strategic role in helping its clients achieve their financial and investment goals.
The performance in a period characterised by adverse macro-economic factors, it noted, was driven by the group's growing market share, efficient execution of key mandates and effective cost management driven by improvements in operations and Information Technology capabilities, thereby optimising value, while retaining a significant proportion of earnings.
The performance of the Nigerian equities market broadly improved last week despite the overall bleak short term outlook as bargain hunting and corporate releases drove market performance.
The market capitalisation appreciated by N45 billion to close at N8.548 trillion when compared with the N8.503 trillion posted the previous week.
Equally, the All-Share Index increased by 130.84 points or 0.54 per cent to close at 24,850.11 as against the 24,719.27 achieved the previous week.
During the week, both Banking and Consumer Goods first quarter results for the period ended March 31, 2016, except for Guinness that came in beat consensus, suggested better-than-expected start to 2016. Reviewing the results showed that Forte Oil’s profit after tax went up 21.85 per cent, Champion Breweries profit after tax (PAT) rose by 520.74 per cent and NEM Insurance’ profit up by 63.98 per cent. Others are UBA, UBN, Transcohot profits which rose by 18 per cent, 96.30 per cent and 35.20 per cent, respectively.
Meanwhile, some companies which results came in during the week showed a decline in their profit. Paintcom shed 50.76 per cent in PAT while CAP, Dangote Sugar and Guinness declined by 13.21 per cent, 71.06 per cent and 84.43 per cent respectively.
Market breadth was positive with 35 gainers versus 32 losers, compared to 26 gainers against 41 losers the previous week. Volume traded eased by 89.01 per cent to 885.37 million shares, worth N5.83 billion and traded in 13,798 deals, compared to the 8.05 billion shares valued at N13.33 billion that exchanged hands in 15,212 deals the previous week.
Speaking on the outlook for the market this week, analysts at Cordros Capital Limited said, “We expect market activities to be driven by the release of additional Q1-2016 earnings results in the coming week. Broadly better-than-expected earnings should be a plus for investors, and vice versa” while analysts at Afrinvest Limited added that “the positive performance and rebound in market sentiment last week was driven by better-than-expected corporate scorecards for the first quarter 2016 period. Sentiment is likely to switch to profit-taking mode in the week ahead as investors continue to speculate on weak macro fundamentals, but further declaration of impressive earnings results may counteract this.”
Dangote Sugar Refinery Plc. has recorded a group turnover of N101bn in 2015, a seven per cent increase over the turnover of N95bn in 2014.
Its profit before tax stood at N16bn and profit after tax at N15bn, while earnings before interest, tax, depreciation and amortisation rose to N21bn compared to N18bn in the previous year.
The Chairman of the group, Alhaji Aliko Dangote, at the 10th Annual General Meeting of the company in Lagos, said the company remained committed to delivering superior returns to its shareholders.
This commitment, he said, informed the recommendation of N6bn dividend for the year ended December 31, 2015.
He said 2015 was a very challenging year as the political transition and economic slowdown impacted consumer spending and the global oversupply of crude oil weakened the naira, leaving an average Nigerian consumer with less purchasing power than in the past three to four years.
The N6bn recommended by the Board of Director represented 48 per cent of the profit after tax.
“This translates to a dividend of 50 kobo per share for every ordinary share each held in the company. The board will continue on this prudent course of action in view of our investment requirement for the backward integration project and building of a sustainable financial future for the company,” Dangote said.
The shareholders commended the company and approved the dividend.
The naira is expected not to rise or fall significantly at the parallel and official foreign exchange market as the economy slows and demand for foreign exchange eases after President Muhammadu Buhari’s delayed signing of the 2016 budget.
The local currency was trading around 322 against the dollar at the parallel market on Friday, the same level as last week, and held steady around the official peg of 197.
“Some important decisions on investment and economic issues are being held back because of the continued delay in the implementation of the fiscal policy for this year,” a forex dealer told Reuters.
Zambia’s kwacha is expected to come under pressure next week after a credit ratings downgrade, while several other African currencies are likely to hold steady.
The kwacha is expected to remain under pressure against the dollar next week due to increasing demand for the US currency and following Zambia’s rating downgrade by Moody’s.
Kenya’s shilling is likely to face some pressure next week from the usual demand for dollars from companies seeking to meet end-of-month payments.
The Ghana’s cedi is expected to remain flat in the week, with traders citing adequate dollar supply to meet corporate demand.
The Tanzanian shilling is expected to hold steady with any demand from importers for dollars met by companies seeking shillings to make regular tax payments.
The Ugandan shilling is expected to strengthen next week, helped by inflows of foreign exchange and weak economic activity that is limiting corporate demand for dollars.
Ensure Insurance Plc, a composite insurance company in Nigeria, said it paid out the sum of N390.86m as claims to customers in the first quarter of 2016.
A statement from the firm on Sunday said the breakdown of the figure showed that the company paid out N170.2m on life insurance claims and a total of N220.64m on general business claims.
It stated that the Group Life claims topped the chart with a pay out of N84.44m while the individual life closed the quarter on N8090m.
In the general business category, the firm said engineering claims led with N64.61m pay out, followed by general accident and fire claims with a total of N42.10m and N39.28m, respectively.
Ensure also recorded significant figures in motor insurance claims, amounting to N38.46m; oil and gas, N21.63m; and aviation, N4.25m, among others.
“The significant increase in the figures for the first quarter of 2016 when compared to the N290m recorded in the first quarter of 2015 is largely due to an increased subscription to the company’s insurance solutions and prompt claims processing, resulting from the thorough review of the company’s product and internal processes,” the statement said.
The company reiterated its commitment to prompt claims settlement, adding that this remained the only way to gain the confidence of the insuring public while assuring all stakeholders that its financial strength, impeccable internal process and partnership with highly rated reinsurance companies both locally and internationally would guarantee customers’ satisfaction.
It stated that Ensure Insurance had also introduced a claims toll free line and a friendly website with claims reporting functionality for customers to report claims quickly, without hassle and still get paid.
“The company also has a strong customer service platform, supported by well trained personnel with a thorough understanding of insurance to promptly and satisfactorily resolve all inquiries and complaints,” the statement said.
Determined to checkmate activities of unregistered insurance brokers in the insurance industry, the National Insurance Commission (NAICOM) has released the list of 300 insurance brokers it has given approval to undertake brokerage business in the industry.
The names of the approved insurance brokers are published on the website of the commission. The commission in December 2015, had published the names of 108 insurance brokers for their failure to meet the regulatory requirements especially failure to renew their licenses.
Industry operators said that majority of the erring firms were sanctioned for violating certain provisions of the insurance Act 2003, such as late submission of their returns to the regulatory body, while some did not even submit returns for several years, non-renewal of operating licence, among other infractions.
When their names were made public, the commission said the affected insurance brokers would not be allowed to renew their operating licences, while those who are still interested to continue operating in the insurance industry would be required to apply for a fresh licence.
The commission through a circular, said an insurance broker whose licence has lapsed and wishes to re-register under the same name should submit a letter of appeal giving reasons why the last licence lapsed and payment of non-refundable fee of N250,000 for processing of the appeal. Moreover, it required the intending broker to equally submit application for re-registration, if appeal is sustained by the commission, adding that such interested broker must make payment of N250,000 application fee, submit Certified True Copy of CAC’s Form CO2 and CO7, evidence of payments of the fee and payment of all outstanding levies due before the licence lapsed.
Other requirements listed in the circular include: Nomination of qualified CEO and Executive Management for regulatory approval; submission of a management account/statement of account as at the last day of last month of the period since the last approved account and apply for NAICOM’s approval of the members of the board of directors.
The commission stated that there would be re-registration inspection of the brokerage firm to determine non-violation of the Insurance Act and payment of penalties for identified violation/non-compliance, while the interested brokers must attend and be successful at the re-registration interview. Besides, interested brokers are required to submit Professional Indemnity Cover Sworn Declaration, Tax Clearance for the expired period of licence, certificate on Oath from the external auditors and payment of licence fee of N2.250 million, after which the licence would be issued to those that fulfil all the listed requirements.