Banking
GTBank Foresees Banks Struggling With 15% CAR
**Expects Tighter System Liquidity, Rise in Interest Rates in 2021
By Dipo Olowookere
One of the leading financial institutions in the country, Guaranty Trust Bank (GTBank) Plc, is projecting a further increase in interest rates.
In its Nigeria Macro Economic and Banking Sector Outlook for 2021 obtained by Business Post, the lender said the spike in the interest rates would be triggered by “the additional borrowings by the government as well as relatively lower OMO maturities into the system.”
GTBank disclosed in the report that it also foresees the Central Bank of Nigeria (CBN) sustaining its “policy stance going into 2021 driven largely by the need to improve credit flow to spur economic growth.”
Recall that recently, in a move to attract portfolio flows and reduce the consistent exit of investors, the CBN increased yields of fixed income securities, causing investors to abandon the equity market, which has so far lost 4.03 per cent this year.
Liquidity expectation
Commenting on the liquidity outlook for the year, GTBank said it expects it to be tighter, noting that, “For one, only N4.3 trillion in OMO securities will be maturing this year, with over 50 per cent of that maturing within the first quarter of the year which implies about N2.5 trillion of liquidity injection into the system in Q1, with attendant CRR implications assuming that the CBN maintains its trend of reissuing a portion of the maturing securities.”
The lender noted that, “This could result in the outflow of more funds from the market in form of CRR,” adding that from Q2 2021, however, “we expect a shift in the liquidity situation of the market, based on the significantly reduced OMO maturities of N1.7 trillion.”
According to the bank, “In the absence of other liquidity injection sources, market liquidity is expected to tighten significantly with a resultant decline in special CRR debits.”
“As a result of the tightening of liquidity conditions expected in the market from Q2 2021, we anticipate a rise in volatilities within the money market and fixed income space.
“We also anticipate a renewed scramble for deposits by banks and other financial institutions to meet demands on them for funds.
“Money market rates, should on average, rise steadily across the period with a resultant pull on deposit and lending rates.
“In view of the above, the CBN might have to consider the possibility of releasing some of the CRR sterilised by it,” the report further said.
Banking sector capitalisation
In terms of the capitalisation of the banking sector, GTBank said it foresees some players struggling with the regulatory minimum capital adequacy ratio (CAR) of 15 per cent as a result of the devaluation of Naira.
“Consequently, we expect banks with shortfalls in their capital positions to retain more of [their] earnings to shore up their capital and keep themselves within touching distance of the minimum regulatory capital requirement.
“It is also not unlikely that the apex bank will offer some form of regulatory forbearance to banks that fall short of the minimum regulatory capital,” the report noted.
Over a decade ago, the banking sector in Nigeria went through a major transformation, with mergers and acquisitions to meet up with the minimum capital base of N25 billion. Some observers have called for a revisit of this amount because of the devaluation of the local currency since then.
Banks and Fintech competition
GTBank said in its report that it projects a level playing field for traditional banks and their non-bank competitors, which are mainly the financial technology (fintech) companies.
It explained this is expected because the CBN, with an expanded role in the new Banking and Other Financial Institutions Act (BOFIA) 2020, would likely increase the operational and regulatory costs of fintechs, which would stifle their drive in the long to medium term.
FX Outlook
In the report, the lender projected a tightening of the gap between the parallel market rate and the official rate due to a marginal adjustment of the currency in 2021.
“Our expectation of the appreciation of parallel market rates is predicated on increased supply to that market, however, it should be noted that a devaluation in the official market usually triggers an immediate devaluation in the parallel market even if short-lived.
“Notably, a further devaluation to levels closer to the general consensus of the true value of the Naira is expected to trigger increased foreign portfolio flows into the country,” it stated.
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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