Banking
Investors Expect Better Returns as Banks Release 2017 Earnings This Month
By Dipo Olowookere
The year 2016 was a very challenging for businesses operating in Nigeria because the economy was in recession.
This had its toll on companies, especially those listed on the Nigerian Stock Exchange (NSE), making some of them to declare loss in their 2016 financial results.
As a result of the loss or drop in profit margins, some shareholders and investors did not get much from their investment in the firms.
But a new report by Bloomberg has disclosed that the 2017 earnings of companies quoted on the local bourse, especially banks, will have improved earnings in the 2017 financial statements, which are expected to trickle in from this month.
The anticipated better earnings would be boosted by the recovery of the nation’s economy, which grew last year by 0.83 percent, according to data released this week by the National Bureau of Statistics (NBS).
Bloomberg said an improvement in unpaid loans, higher interest income from holding government debt and a rise in profit will have helped lenders bolster their capital buffers, going by Renaissance Capital analysts including Olamipo Ogunsanya and Ilan Stermer.
The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017. An increase in crude prices and the introduction of a new foreign-exchange system that ended a crippling shortage of dollars helped attract more investment flows into the country, while improving liquidity for the nation’s lenders.
Here’s a closer look at some of the major drivers and points of interest that investors will keep an eye on as they assess the outlook for banks.
Yield Benefit
Record high interest rates of 14 percent since July 2016 means there is no shortage of yield for banks, many of which parked their funds to profit from the safety of Treasury bills and other fixed-income securities rather than lending, where there is more risk.
A drop in those yields from record highs in August means that 2018 will be more challenging for lenders, despite the positive macro backdrop, according to Ogunsanya and Stermer. Volatility in foreign-exchange related gains, limited scope for cost efficiencies and rising political risks before elections in early 2019 also cloud the outlook for this year, the RenCap analysts said.
Lenders Lending
Banks will be able to close the revenue gap created by declining interest rates by lending more into a strengthening economy, according to Stanbic IBTC Holdings Plc analyst Muyiwa Oni. Some banks may boost loan growth to 15 percent this year compared with 10 percent in 2017, he said.
“Credit growth will be a big driver” in 2018, Oni said. While lower rates may reduce the cost of funding for banks, net interest margins may still narrow by anything from 100 basis points to 200 basis points this year, he said.
Fewer Sour Loans
The recession in 2016 hampered the ability of companies to meet their obligations to lenders, prompting a surge in bad debts. Non-performing loans as a percentage of overall credit peaked at 26 percent for FBN Holdings Plc, the country’s largest lender by revenue. NPLs will continue to trend downward after improving to 20 percent in the nine months through September, Adesola Adeduntan, the chief executive officer of FBN’s First Bank of Nigeria, said on Feb. 22.
An improvement in operating conditions, the restructuring of loans, recoveries and some write-offs will see the pace of unpaid loans ease into 2018, Fitch Ratings said in October.
Capital Challenges
At least three small- to medium-sized banks will run into difficulties with their capital levels this year and will need to raise cash, said Robert Omotunde, the head of investment research at Afrinvest West Africa Ltd., without naming the lenders. “A lot of tier two banks have issues with NPLs and it’s eating into their capital buffers.”
Stanbic IBTC’s Oni predicts that the capital adequacy ratio across the industry will probably drop by 100 to 200 basis points, mainly because of the introduction of IFRS 9 reporting standards, which will require higher provisioning.
Bigger lenders including Zenith Bank Plc, United Bank for Africa Plc and Access Bank Plc were able to raise funding in the Eurobond market last year, while smaller ones struggled to boost their buffers. Stress tests showed that the capital adequacy ratio across the banking industry worsened to 12.8 percent in April from 13.6 percent in February, according to the central bank.
Taking Stock
There is still some room for shares to rally even after the Nigerian Stock Exchange Banking 10 Index surged by a record 73 percent in 2017, according to Lekan Olabode, a bank analyst at Vetiva Capital Management Ltd. in Lagos, although the pace won’t match that seen last year. Smaller lenders may also show faster earnings growth and biggest share-price gains.
“The banking sector is significantly undervalued,” he said. “This year, it is the small banks that we expect to do more.”
By Modupe Gbadeyanka
In a bid to ensure consumer safety across the telecommunications and financial services sectors, the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) have decided to work together.
On Monday, both organisations sealed a Memorandum of Understanding (MoU) for the establishment of joint committees for the protection of consumers against fraud in the sectors.
The two teams set up by the CBN and the NCC include the Joint Committee on Payment Systems and Consumer Protection, and the Joint Committee on Telecoms Identity Risk Management System (TIRMS) Portal.
Through the TIRMS portal, which aggregates data on churned (recycled) phone numbers, as well as numbers flagged within the financial services sector, it will now have enhanced visibility into the status of phone numbers, one of the most widely utilised resources in the sector, although regulated by the NCC.
With this, according to the chief executive of NCC, Mr Aminu Maida, financial institutions will be able to determine when a line is active, when it has been swapped, when it has been disconnected due to inactivity and reassigned to a new subscriber, and when it has been flagged for suspicious or fraudulent activity. “This ensures that our financial services industry is better equipped with timely and relevant information to effectively combat e-fraud, particularly those perpetuated using phone numbers, in the country,” he stated.
It was stated that the partnership between the two parties will reduce electronic fraud, which has become increasingly pervasive, with significant implications for the integrity of the digital economy.
In his remarks, the Governor of the CBN, Mr Yemi Cardoso, said the MoU will strengthen coordination on approvals, technical standards, and innovation trials, including sandbox testing that supports market-led solutions, while safeguarding stability.
“Going forward, the CBN remains fully committed to working with the NCC to deliver a safer, more resilient, and more inclusive digital financial system that supports national productivity, protects consumers, and strengthens trust in Nigeria’s digital economy,” the central bank chief said.
By Aduragbemi Omiyale
Mid-level Nigerian lender, Wema Bank Plc, has set its eyes on expanding its market presence and supporting the government in achieving its $1 trillion economy by 2030.
In a statement, the financial institution said it hopes to achieve these and others through its recently recapitalisation exercise, which saw its capital base rise to about N265 billion, well above the N200 billion-threshold set by the Central Bank of Nigeria (CBN) for its category of licence.
Wema Bank operates with a national licence, and based on the regulator’s requirement, the capital base must be at least N200 billion.
Before the March 31, 2026-deadline set be the CBN, banks were required to have at least N25 billion, but to meet up with the 2030 target of the federal government, this threshold was raised, with banks operating branches out the country asked to have at least N500 billion, while regional banks were told to have a minimum of N50 billion.
To comply with the new directive, Wema Bank embarked on a strategic capital raise through the stock market, successfully strengthening its shareholder base and securing the required capital through strong participation from existing investors.
Its N150 billion rights issue, which opened on April 14, 2025, and closed on May 21, 2025, marked a significant step in this journey. This was subsequently complemented by a N50 billion special placement later in the year, ensuring the bank not only met but exceeded the regulatory threshold well ahead of schedule.
“The successful completion of our recapitalisation exercise is a defining moment for Wema Bank. It is a strong validation of our strategy, our performance, and the enduring confidence our shareholders and stakeholders have in our vision.
“We have not only met the CBN’s requirements; we have exceeded them, reinforcing our position as a National Bank with the scale, strength, and stability to compete and lead,” the chief executive of Wema Bank, Mr Moruf Oseni, stated.
“Looking ahead, we remain focused on deepening our market presence, driving customer-centric innovation, and strengthening our role as a catalyst for growth across retail, SME, and corporate segments.
“This is not just about retaining our license; it is about building a bigger, stronger, and more impactful Wema Bank,” the bank executive further stated.
By Adedapo Adesanya
President Bola Tinubu has given approval for the investment of $75 million in Flutterwave, as part of the payments company’s efforts to raise $250 million through an Initial Public Offering (IPO).
The investment is expected to be executed through the Ministry of Finance Incorporated (MoFI), according to reports on Monday.
Since its founding in 2016, Flutterwave has rapidly expanded and now has a presence in about 30 African countries. The company’s valuation is at $3 billion.
According to the reports, the fintech company approached the federal government last year to participate in the offer, which has been in motion since it was first touted as far back as 2022.
Flutterwave’s IPO has been delayed by its lack of sustained profitability, earlier governance and misconduct scandals, and unfavourable global market conditions.
It was gathered that MoFI engaged two of the Big Four global accounting and auditing firms to carry out a detailed review of the company’s financial statements and operations, in a move aimed at ensuring due diligence and strengthening investor confidence.
Citing sources, the newspaper said Flutterwave brought Nigerian government participation to secure sovereign backing and reinforce confidence in Nigeria’s growing technology sector.
According to the sources, the move was also intended to project Nigeria’s potential on the global stage, adding that the company is also using the IPO to widen ownership and allow more Nigerians to invest in its growth.
The paper also reported that the IPO would expand ownership, giving more Nigerians the opportunity to invest in one of Africa’s leading fintech companies.
Market interest in the offer is said to be strong, with existing investors indicating plans to increase their stakes, while new institutional players are also positioning to participate.
This development is coming after the Central Bank of Nigeria (CBN) granted Flutterwave a license to operate microfinance banking services in Nigeria. The license enables the company to hold funds and deposits directly, strengthening its financial infrastructure across its largest market and enabling more efficient financial services and settlement flows for consumers, businesses and enterprises.
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