MainstreetBank acquisition may dip Skye Bank’s earnings

MainstreetBank acquisition may dip Skye Bank’s earnings

MainstreetBank acquisition may dip Skye Bank’s earnings

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.

Source:© Copyright Guardian Online