Banking
Agusto Forecasts 16.5% Growth in Nigerian Banking Loan Portfolio
By Adedapo Adesanya
Agusto & Co. Limited, the pan-African credit rating agency and the foremost business information provider, has forecast a 16.5 per cent growth in the Nigerian banking loan portfolio.
This was released in its 2022 Nigerian Banking Industry Report which provides a comprehensive review of Nigeria’s banking industry and the near-term expectation for the Industry.
Agusto & Co. noted positively the resilience shown by the Nigerian banking industry in FY 2021, as the Industry’s loan portfolio grew by 21 per cent despite the weak economy and regulatory constraints.
“Notwithstanding the prevailing global supply constraints, the Russian-Ukraine crisis, and insecurity challenges that continue to hamper food and crude oil production in Nigeria, we anticipate a 16.5 per cent year-on-year loan growth in 2022 as more banks now have a better understanding of the macroeconomic headwinds,” it noted.
The firm noted in the report seen by Business Post that traditional sectors such as oil and gas, manufacturing, general commerce, and agriculture sectors are expected to drive the loan growth given the backward integration initiatives of obligors, the intervention activities of the Central Bank of Nigeria (CBN) and the import-dependence nature of the Nigerian economy.
‘While the arbitrary cash reserve deductions and foreign exchange illiquidity would remain limitations to the growth of the Industry’s loan portfolio, we note that more banks are now favourably disposed to accessing the differentiated cash reserve requirement (DCRR) window to reduce the value of sterile restricted funds with the CBN.
“In the near term, we believe the Industry’s asset quality will remain acceptable, with the impaired loan ratio hovering around 6 per cent as at 31 December 2022. In our view, a proactive tightening of controls around loan origination and intensified loan monitoring will moderate the impact of the tough operating climate on the loan portfolio,” the report stated.
It was revealed that Nigeria’s banking industry remains well capitalised relative to the business risks undertaken and should remain so in the near term.
“In preparation for the full implementation of Basel III and based on the scheduled growth plans, we expect an increased appetite for perpetual bond issuances which qualify as additional tier 1 capital. We also believe that some banks will raise common equity tier 1 capital that will keep the Industry’s capital adequacy ratio above 17 per cent.”
Looking forward, “In FY 2022, Agusto & Co projects a decline in the industry’s net interest spread as the prevailing low yields on government securities, which dominate the industry’s investment securities, will moderate the impact of the uptick in interest rates. However, we anticipate an increase in the net earnings driven largely by higher trading income and electronic banking fees.
“Nevertheless, we note that the forthcoming elections and growing budget deficit have forced the FGN to modify several extant tax legislations which will moderate the banking industry’s profits. Overall, Agusto & Co expects the Industry’s pre-tax return on average equity to increase to 23 per cent (FY 2021: 20.6 per cent) in FY 2022.
“Our financial prospects for Industry are largely stable in the near term. We adjudge the industry as resilient and the current trend of banks adopting the holding company structure to diversify into other financial services segments while exercising control over subsidiaries should support the Industry’s profitability.
“The African Continental Free Trade Area (AfCFTA) is also another vital prospect for Nigerian banks given that financial institutions with a strong capital base and efficient network across the continent are essential for the full implementation of AfCFTA,” it added.
Overall, Agusto & Co believes the banking industry’s performance will remain moderate in the short to medium term and on this basis, adding that the outlook for the Industry is stable.
By Aduragbemi Omiyale
The Central Bank of Nigeria (CBN) has reaffirmed that the old and new Naira notes will continue to be used for financial transactions in the country beyond December 31, 2024.
There had been rumours that the old and redesigned N200, N500, and N1,000 banknotes would no longer be legal tender from Wednesday, January 1, 2025, because the central bank would phase out the notes in compliance with a Supreme Court judgement of November 29, 2023.
But the apex bank, in a statement signed by its acting Director of Corporate Communications, Mrs Hakama Ali, on Friday, clarified that the apex court’s judgement being cited did not authorise the bank to phase out the banknotes by the end of this year.
According to her, the court allowed the CBN to leave the old and new notes to be used concurrently until it decides to gradually phase out the former.
The central bank’s spokesperson urged members of the public to disregard claims suggesting the old series of these denominations would cease to be valid at the end of this year.
She urged them to continue to accept all Naira notes for daily transactions, encouraging banks to also adopt alternative payment methods such as electronic channels to reduce the pressure on physical cash usage.
“The Central Bank of Nigeria (CBN) has observed the misinformation regarding the validity of the old N1000, N500, and N200 banknotes currently in circulation.
“In line with the bank’s previous clarifications and to offer further assurance, the CBN wishes to reiterate that the subsisting Supreme Court ruling granted on November 29, 2023, permits the concurrent circulation of all versions of the N1000, N500, and N200 denominations of the Naira indefinitely.
“For the avoidance of doubt, all versions of the naira, including the old and new designs of N1000, N500, and N200 denominations, as well as the commemorative and previous designs of the N100 denomination, remain valid and continue to be legal tender without any deadlines,” the statement noted.
By Adedapo Adesanya
Access Bank Plc, the banking subsidiary of Access Holdings Plc, has entered into a binding agreement with South African-based Bidvest Group Limited for the acquisition of 100 per cent equity stake in Bidvest Bank Limited.
The deal for the 24-year-old South African lender is due to be completed in the second half of 2025, upon regulatory approval.
This shows Access Bank’s further expansion plans in line with goals set by its late founder, Mr Herbert Wigwe.
The agreement to acquire 100 percent stake in Bidvest Bank reflects Access Bank’s commitment to strengthening its footprint in South Africa and consolidating on its position as the continent’s gateway to global markets as it seeks to optimise the benefits of recent acquisitions and accelerate its transition towards a greater focus on efficiencies.
Bidvest Bank, founded in 2000 is a niche and profitable South African financial institution providing a diverse range of services, including corporate and business banking solutions and diverse retail banking products.
As of its year ended June 2024, Bidvest Bank reported total assets equivalent of $665million and audited profit before tax of $20million.
Upon conclusion of this acquisition, Bidvest Bank will be merged with the bank’s existing South African subsidiary to create an enlarged platform to anchor the regional growth strategy for the SADC region.
This is coming just as the bank opened a new branch in Malta as part of efforts to focus on international trade finance after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
The Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
By Modupe Gbadeyanka
To strengthen Europe-Africa trade ties, Access Bank has opened a new branch in Malta. It will focus on international trade finance, employing approximately 30 people in its initial phase, with plans for controlled expansion over time.
It was learned that this Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
Access Bank Malta Limited commenced operations after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
Malta, a renowned international financial centre, and a gateway between the two continents, is strategically positioned to play a pivotal role in advancing commerce and fostering economic partnerships.
This strategic expansion into Malta enables The Access Bank UK Limited to leverage growing trade opportunities between Europe and Africa.
It underscores the organisation’s commitment to driving global trade, financial integration, and supporting businesses across these regions.
“By establishing operations in Malta, we will gain a foothold in a market that bridges European and North African economies, moving us one step closer to our goal of becoming Africa’s Gateway to the World.
“It further enhances our bank’s capacity to support clients with innovative solutions tailored to cross-border trade and investment opportunities,” the chief executive of Access Bank, Mr Roosevelt Ogbonna, stated.
“Europe has emerged as Africa’s leading trading partner, driven by initiatives such as the Economic Partnership Agreements between the EU and African regions and the African Continental Free Trade Area (AfCFTA).
“With Europe-Africa economic relations entering a new phase, The Access Bank Malta Limited is ideally positioned to deepen trade and meet the financing and banking needs of our clients in these expanding markets,” the chief executive of Access Bank UK, Mr Jamie Simmonds, commented.
Also speaking, the chief executive of Access Bank Malta, Renald Theuma, said, “Malta is uniquely positioned as a bridge between Europe and Africa, making it an ideal location for our subsidiary. This move allows The Access Bank Malta Limited to engage more closely with customers in Europe and deliver tailored financial solutions that drive growth and connectivity across both continents.”
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