FBN Holdings Plc. plans to cut jobs and focus less on providing loans to the oil industry in a bid to reverse last year's 82 percent slump in profit.
The lender expects to boost its return on equity, a key measure of profitability, to between 11 per cent and 14 per cent in 2016 from last year's "really bad" figure of 3 percent, according to the chief executive officer of FirstBank Nigeria Limited, Mr. Adesola Adeduntan. The bank is also targeting a cost-to-income ratio of 55 percent in two years time from 59 percent, he said.
Bloomberg quoted him as saying: "ROE will be much better than last year. At a minimum, we should triple it. We do not shy away from taking difficult decisions. We used to have above 8,000 people. We'll push it down, gradually, to 7,000."
Net profit fell to N15 billion from N84 billion in 2014, as impairments soared and Africa's biggest economy slowed amid a crash in the price of crude, the biggest source of government revenue and export earnings. Growth decelerated to 2.8 percent in 2015, the lowest level since 1999, and may worsen to 2.3 percent this year, according to the International Monetary Fund.
First Bank's non-performing loans ratio stood at 22 percent at the end of March, compared with 3.8 percent a year earlier. Reducing that figure is the "number one priority," said Adeduntan. The bank will do that by reducing the proportion of its lending to the oil and gas sector, currently at about 39 per cent of total loans, and focusing more on blue-chip companies in other industries, he said.
Adeduntan ruled out any equity raising this year, saying the bank's capital adequacy ratio of 17.2 percent was enough of a buffer and above the central bank's minimum requirement of 15 percent. It would still be adequate if the floor is raised to 16 percent in July for systemically important institutions, including First Bank.
"We continuously evaluate it and the position now is that there's no need for external capital," said Adeduntan who became CEO in January after joining First Bank as chief financial officer in mid-2014. "We generate enough internal capital," he said.
In line with its earlier profit guidance, Diamond Bank Plc. on Wednesday reported a fall of 88 per cent in profit after tax for the year ended December 31.2015. Although the bank recorded a growth of 4.3 per cent in gross earning, its profit before and after tax fell significantly.
Diamond Bank ended the year with gross earnings of N217 billion, up from N208 billion in 2015. But profit before tax fell from N28.1 billion in 2015 to N7.1 billion, while profit after tax stood at N5.6 billion, down from N25.6 billion. The lower bottom line was affected by high net impairment loss on financial assets, which jumped by 109 per cent from N26.3 billion to N55.2 billion.
In his comments, the Chief Executive Officer of Diamond Bank, Mr. Uzoma Dozie, said: "2015 was undoubtedly a challenging year for us owing to a mixture of external factors not limited to regulatory headwinds and a difficult macroeconomic environment. Whilst this led to additional impairment charges following a prudent review, we have further tightened the criteria for loan originations in order to better align our loan portfolio with the macroeconomic conditions. As a result, we are confident that the overall quality of our loan book remains high."
According to the CEO, a number of mitigating actions are being taken to address and drastically reduce these challenges, thereby putting Diamond Bank in a better position to achieve better results and strong earnings for the shareholders in the current business year.
He highlighted the transformation the bank was going through and remained positive that reliance on innovation, technology and lifestyle priorities will drive banking in the future and Diamond is well positioned to take advantage of this. He expressed optimism about the growth and value to shareholders and restated his commitment to overseeing full implementation of the bank's digital-led retail strategy.
"Importantly, there are clear signs that the new strategy and initiatives to reduce costs are proving successful and are reflected in certain financial indicators. Fundamentally, by taking various mitigating actions and implementing the retail-led digital strategy, Diamond Bank has an excellent platform from which to achieve growth, profitability and shareholder returns in the year ahead. New retail accounts opened has grown more than fivefold and with a network of over 24,000 agents as at December 2015, active account ratio continues to improve. These create a measure of confidence going into the future," said Dozie.
Lagos state government yesterday said it had successfully completed the restructuring of its N167.5 billion Programme II, Series 1 and 2 Bonds.
In a statement, the State Commissioner for Finance, Mr. Akinkunmi Mustapha, said the restructuring which was approved by the Securities and Exchange Commission (SEC) last week, was achieved through the finalisation of a process through which the State worked to reach an agreement with its bond creditors, on accelerating repayment terms.
He said the transaction which will generate savings in excess of N40 billion for the state over the next five years was approved by 99.6 per cent of the state's bondholders at an extraordinary general meeting a few weeks ago. Mustapha said: "We thank all our bond creditors for their continued support of the State Government, in a difficult market environment. This restructuring completed entirely through domestic capital markets, once again underpins the strength of the Lagos State credit story.
"Aside the significant cash savings generated, it also creates additional borrowing capacity to enable the state continue its investments in physical, economic and social infrastructure.
"Much of the significant progress in Lagos State over the last 16 years can be attributed to funding through the debt capital market. Our bondholders' support of this restructuring confirms the level of confidence the market has in the current administration and Lagos State did not partake in the recent bail-outs provided either by the Federal Government DMO or the Central Bank of Nigeria (CBN)," the Commissioner said.
He said the Chapel Hill Denham acted as Financial Adviser to the Lagos State on the restructuring transaction.
Wema Bank Plc. has attributed the drop in its business performance as of year end March 31, 2016 to the challenging environment led by weaker oil prices, a tight monetary policy and rising inflation.
The bank reported a profit of N429.53m between March 2015 and March 2016, a fall of 17.87 per cent year-on-year from N522.99m.
Its profit before tax also fell to N505.32m from N615.28m for the same period.
Commenting on the result released on Wednesday, the Managing Director/Chief Executive Officer, 'Segun Oloketuyi, said, "Considering the challenging operating environment, the bank has been able to deliver top line growth with gross earnings increasing by 6.1 per cent to N11.3bn compared to N10.6bn in the same period last year.
"We have continued to grow our retail volumes in 2016; while the number of new accounts and card activations has increased by over 50 per cent and the deployment of alternative platforms has grown by 15 per cent. We remain focused on keeping our cost profile under check while gradually growing the asset portfolio where we see optimal opportunities.
"While concerns remain as we progress in the financial year around, rising inflation due to the impact of higher energy, transportation prices and a slower Gross Domestic Product growth due to a lack of stimulus, we remain focused on executing our strategies to drive economic production."
Despite these headwinds, the bank said it believed that it would improve its 8.2 per cent growth in interest income over Q1 2015 which it said would translate into improved net interest margins and consequently, improving profitability over the course of the year.
Its Chief Financial Officer, Tunde Mabawonku, was quoted as saying "In spite of the challenging market conditions, the bank grew its interest income by 8.2 per cent to N9.7bn from N8.9bn in Q1 2015. While trading income has not been immune from the larger macro headwinds, our diversification strategies are yielding results as fee and commission income grew by 17.1 per cent to N1.35bn from N1.15bn in the same period last year.
"Our sustained commitment to optimising costs was underpinned by a 2.2 per cent decline in operating expenses to N5.14bn from N5.25bn in Q1 2015 despite inflationary pressures. We experienced a year-on-year four per cent decline in net interest income to N4bn, this was mitigated by a 17 per cent growth in our non-interest income to N1.3bn over the same period."
Investment analysts have predicted that Skye Bank may witness a dip in its earnings for the 2015 financial year as a result of its acquisition of Mainstreet Bank.
The analysts from Proshare Nigeria, noted that the cost of the Bank’s acquisition, as well as the high cost of integration of its IT platforms and processes would drive up Skye Bank’s operating expenses as reflected in the bank’s high cost-to-income ratio, which was put at above 70 per cent as at the third quarter of 2015.
According to the analysts, Skye Bank had even explained in its profit warning that the growing bad loans in oil and gas and real estate sectors hit the bank’s operations considerably.
Proshare analysts in a report, stated: “Why investors should expect contained earning in 2015 result, the effects of some government policies such as the public sector funds freeze will 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 & Gas, Power and Real Estate sectors.”
The financial analysts envisage that 26 per cent of total loan portfolio of the bank in third quarter of 2015 was in Oil and Gas while the same troubled sector owned 28 per cent of total non-performing loans (bad debts) as revealed in its report for the same quarter
According to the report, the crash of price in oil market had made it significantly difficult for risk assets in the sector to perform.
The report further said the Central-Bank and government reform policies, which for years lifted asset prices, are now hurting banks; and in some cases, created disruptions, adding that the impact of economic reforms and policy positions would be revealed in the next few weeks when the banks begin reporting their results.
Following Enabulele’s complaints to The Guardian that he had been unable to get his share certificates from DVCF Oil and Gas Plc. since the company completed its IPO and his inability to get returns from both Beco Petroleum Products Limited and Investment and Allied Insurance Plc., The Guardian contacted the registrars of the concerned companies to ascertain the true position of Enabulele’s case.
Africa Prudential Registrars Plc., 220B, Ikorodu Road, Palmgrove Lagos, telephone 234-7080606400, Email: info@africaprudentialregistrars.com, which handles Beco register of shareholders, advised Enabulele to contact them (Registrars) directly through the above address for solution to his complaints.
When The Guardian contacted Unity Registrars Limited, a staff of the firm, who identified himself simply as Mr. Ikotun, told The Guardian that Enabulele might have failed to fill e-dividend form or furnish them (registrar) with his latest address, which has made them unable to reach him.
Ikotun entreated The Guardian to tell Enabulele to contact Unity Registrar through Phone: 08085009235, email: info@unityregistrarsng.com, for prompt attention.
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.
