Economy
Nigerian Banks In Credit Crisis—Report
Says, Unity Bank, Skye Bank “Close to Being Insolvent”
By Modupe Gbadeyanka
A report by Bloomberg on Monday has raised an alarm that some Nigerian banks may be fighting undercapitalisation crisis at the moment. Seven banks were said to be in this mess.
Two of the banks, Skye Bank and Unity Bank, are close to being insolvent, Bloomberg quoted Arqaam Capital as saying in the report.
It was said that the credit crunch is being caused by failed fiscal and monetary policies.
FBN Holdings Plc and Sterling Bank Plc “will need a dilutive capital hike,” Jaap Meijer and Tarek Sleiman, analysts at the Dubai-based investment bank and brokerage, said in an e-mailed note on Monday.
“Our acid test reveals seven under-capitalized banks” with a deficit of as much as N1 trillion ($3.2 billion) in the financial system, Meijer and Sleiman said.
A stress test identified FBN as the most under-capitalized lender with Unity, Diamond Bank Plc, Skye, FCMB Group Plc, Sterling and Fidelity Bank Plc also showing deficits if they were to fully provide for non-performing loans, according to Arqaam.
But spokesman for Diamond Bank, Mr Ikechukwu Mike Omeife, told Bloomberg that, “Our bank is strong,” adding that “Our capital-adequacy ratio and non-performing loans are within the statutory requirements.”
In July 2016, the Central Bank of Nigeria (CBN) changed the management of Skye Bank after the lender breached liquidity thresholds, spurring concerns about the health of small- and medium-sized lenders, and reviving memories of bank rescues by the government after the financial crisis in 2009.
At the moment, banks in Nigeria are grappling with a devaluation of the Naira, rising bad loans and an oil-dependent economy that’s set to record its first annual contraction in more than two decades.
Moody’s Investors Service said on Monday that Nigeria’s five biggest banks share common credit challenges related to the economic slowdown. Moody’s expects non-performing loans to increase to about 12 percent over the next 12 months.
The ratio of non-performing loans to total credit rose to 11.7 percent at the end of June from 5.3 percent at the end of 2015, the Abuja-based Central Bank of Nigeria, which requires banks keep the measure below 5 percent, said in a report on its website.
The five largest lenders, which together hold 57 percent of the country’s banking assets, “are able to absorb all losses under our severe stress scenario,” Moody’s said.
Guaranty Trust Bank Plc showed “the greatest resilience” and the other four banks were Zenith Bank Plc, Access Bank Plc, United Bank for Africa Plc and First Bank of Nigeria Ltd., the ratings company said.
To create a capital buffer, Sterling Bank is planning to issue a 27 billion-naira bond and “if the interest rate looks better, we will do it this year,” Abubakar Suleiman, the lender’s chief financial officer, said by phone. “We will do it if the rate goes down to around 15 percent or 16 percent. We don’t want to raise it at a very high rate. If we do it, it will take our capital adequacy ratio to over 15 percent.”
Arqaam rates FBN, Skye, Sterling, Stanbic IBTC Holdings Plc, Unity and Ecobank Transnational Inc. as sell, according to the analysts’ report. Zenith, Access and United Bank are rated buy.
Central Bank of Nigeria’s spokesman Isaac Okorafor didn’t immediately answer his phone or respond to text messages. Diamond, Unity and Fidelity didn’t answer calls. Moses Obajemu, a Lagos-based spokesman for Skye, didn’t immediately reply to questions sent to him by text message, as per his request.
Diamond, Fidelity, Wema Bank Plc, FCMB Group Plc, United Bank and Skye recorded declines in Lagos, with Zenith ranking as the most traded stock among the 171 securities on the Nigerian Stock Exchange All Share Index. Diamond Bank fell 5.5 percent, Fidelity dropped 4.3 percent, Skye Bank slid 4.6 percent and Unity slipped 4.1 percent. Union Bank Nigeria Plc, which is part owned by London-based Atlas Mara Ltd., was the second-biggest gainer, rising 5 percent.
Additional information from http://www.bloomberg.com/news/articles/2016-10-10/nigerian-banking-industry-seen-in-full-blown-financial-crisis
By Dipo Olowookere
A 1.08 per cent growth was further printed by the Nigerian Exchange (NGX) Limited on Friday on improved appetite for Nigerian stocks.
Data showed that the insurance sector lost 0.61 per cent yesterday due to profit-taking as the energy space gave up 0.08 per cent, while the commodity counter closed flat.
However, the industrial goods landscape appreciated by 2.06 per cent, the banking index improved by 1.31 per cent, and the consumer goods sector expanded by 0.83 per cent.
At the close of business on Customs Street, the All-Share Index (ASI) increased by 1,563.92 points to 147,040.07 points from 145,476.15 points and the market capitalisation went up by N996 billion to N93.722 trillion from N92.726 trillion.
UAC Nigeria led the advancers’ log yesterday after it grew by 10.00 per cent to N96.80, Transcorp Hotels jumped by 9.71 per cent to N172.80, Royal Exchange appreciated by 8.89 per cent to N1.96, Ikeja Hotel soared by 8.74 per cent to N31.10, and Veritas Kapital leapt by 8.07 per cent to N1.74.
On the flip side, Union Dicon declined by 10.00 per cent to N6.30, ABC Transport slipped by 9.88 per cent to N3.10, AXA Mansard depreciated by 7.19 per cent to N12.90, FTN Cocoa lost 4.62 per cent to trade at N4.75, and Guinea Insurance dropped 3.36 per cent to finish at N1.15.
A total of 38 stocks ended on the gainers’ table and 17 stocks finished on the losers’ table, representing a positive market breadth index and strong investor sentiment.
Traders transacted 361.6 million equities for N14.8 billion in 21,051 deals yesterday versus the 1.9 billion equities worth N19.2 billion traded in 23,369 deals a day earlier, showing a decline in the trading volume, value, and number of deals by 80.97 per cent, 22.92 per cent, and 14.20 per cent, respectively.
The busiest stock for the session was Zenith Bank with 59.5 million units worth N3.6 billion, Access Holdings traded 46.1 million units valued at N973.0 million, Fidelity Bank exchanged 29.4 million units for N560.4 million, FCMB transacted 27.9 million units worth N293.9 million, and Tantalizers sold 13.0 million units valued at N29.8 million.
By Adedapo Adesanya
Energy stocks influenced the 4.76 per cent loss recorded by the NASD Over-the-Counter (OTC) Securities Exchange on Friday, December 5.
The culprits were the duo of 11 Plc and Nipco Plc,with the former shedding N32.17 to end at N291.83 per share compared with the previous day’s N324.00 per share, and the latter down by N21.00 to sell at N195.00 per unit versus the previous session’s N216.00 per unit.
Consequently, the NASD Unlisted Security Index (NSI) slumped by 170.16 points to 3,401.37 points from 3,571.53 points and the market capitalisation lost N101.81 billion to close at N2.035 billion from the N2.136 trillion quoted in the preceding session.
The OTC securities exchange suffered the decline yesterday despite the share prices of three companies closing green.
Central Securities Clearing System (CSCS) Plc was up by N1.80 to close at N39.80 per share compared with Thursday’s price of N38.00 per share, Air Liquide Plc appreciated by N1.09 to N11.99 per unit from N10.90 per unit, and FrieslandCampina Wamco Nigeria Plc grew by 78 Kobo to N56.57 per share from N55.79 per share.
During the session, the volume of transactions rose by 6,885.3 per cent to 18.2 million units from 4.3 million units, the value of transactions ballooned by 10,301.7 per cent to N389.7 million from N347.2 million, but the number of deals declined by 29.7 per cent to 26 deals from 37 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc ended the day as the most traded stock by value on a year-to-date basis with 5.8 billion units worth N16.4 billion, followed by Okitipupa Plc with 170.4 million units valued at N8.0 billion, and Air Liquide Plc with 507.5 million units worth N4.2 billion.
InfraCredit Plc also finished the day as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units worth N524.9 million.
By Adedapo Adesanya
The Naira depreciated further against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, December 5, as FX demand pressure mounts.
The Nigerian currency lost N2.60 or 0.18 per cent against the greenback to close at N1,450.43/$1 compared with the previous day’s N1,447.83/$1.
Equally, the domestic currency declined against the Pound Sterling in the official forex market during the session by N4.48 to trade at N1,935.45/£1, in contrast to Thursday’s closing price of N1,930.97/£1 and shrank against the Euro by 43 Kobo to end at N1,689.17/€1 versus the preceding session’s rate of N1,688.74/€1.
Similarly, the local currency performed badly against the US Dollar at the GTBank FX counter by N2 to close at N1,455/$1 versus Thursday’s N1,453/$1 but traded flat at the parallel market at N14.65/$1.
As the country gets into the festive period, pressure mounted on the local currency reflecting higher foreign payments and lower FX inflows.
However, there are expectations that the Nigerian currency will be stable, supported by interventions by to the Central Bank of Nigeria (CBN) in the face of steady dollar Demand and inflows from Detty December festivities that will give the Naira a boost after it depreciated mildly last month.
Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450/$1 next week, buoyed by improved FX interventions by the apex bank.
As for the crypto market, it was down yesterday due to profit-taking associated with year-end trading. However, the December 1-Year Consumer Inflation Expectation by the University of Michigan fell to 4.1 per cent from 4.5 per cent previously and 4.5 per cent expected. The 5-Year Consumer Inflation Expectation fell to 3.2 per cent from 3.4 per cent previously and 3.4 per cent expected.
With the dearth of official economic data of late, these private surveys have taken on a new level of significance and the market banks of them to make decisions.
Cardano (ADA) depreciated by 5.7 per cent to $0.4142, Dogecoin (DOGE) slid by 5.1 per cent to $0.1394, Ethereum (ETH) dropped by 3.9 per cent to $3,039.75, Solana (SOL) declined by 3.8 per cent to $133.24, and Litecoin (LTC) fell by 3.7 per cent to $80.59.
Further, Bitcoin (BTC) went down by 2.6 per cent to sell at $89,683.72, Binance Coin (BNB) slumped by 2.2 per cent to $883.59, and Ripple (XRP) shrank by 2.1 per cent to $2.04, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
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