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
About 0.04 per cent was recovered on Friday from the loss recorded by the Nigerian Exchange (NGX) the previous due to profit-taking.
Yesterday, investors were in the market with renewed vigour, mopping up stocks trading at relatively cheaper prices.
According to data, the insurance counter gained 0.41 per cent, the banking sector appreciated by 0.38 per cent, and the consumer goods index grew by 0.14 per cent.
The gains achieved by these three sectors were enough to lift Customs Street at the close of business despite the 0.26 per cent decline printed by the industrial goods segment and the 0.14 per cent loss suffered by the energy industry. The commodity counter was flat during the session.
A total of 43 equities gained weight on the last trading day of this week, while 26 equities shed weight, indicating a positive market breadth index and strong investor sentiment.
Red Star Express increased its share price by 10.00 per cent to N13.20, NCR Nigeria grew by 9.97 per cent to N128.55, SCOA Nigeria inflated by 9.96 per cent to N14.90, Omatek appreciated by 9.94 per cent to N1.77, and Deap Capital expanded by 9.85 per cent to N4.46.
On the flip side, McNichols decreased by 8.81 per cent to N6.00, Legend Internet crumbled by 7.56 per cent to N5.50, Cornerstone Insurance crashed by 6.48 per cent to N6.35, C&I Leasing contracted by 6.29 per cent to N8.20, and Austin Laz slipped by 5.78 per cent to N3.75.
Yesterday, 539.9 million shares valued at N16.7 billion were transacted in 48,023 deals versus the 1.0 billion shares worth N31.6 billion executed in 51,227 deals in the preceding day, implying a shrink in the trading volume, value, and number of deals by 46.01 per cent, 47.15 per cent, and 6.26 per cent apiece.
Zenith Bank was the most active for the day with 54.6 million stocks sold for N3.8 billion, Jaiz Bank traded 41.5 million units worth N359.4 million, Secure Electronic Technology transacted 37.7 million units valued at N39.2 million, Access Holdings exchanged 30.5 million units for N699.2 million, and Lasaco Assurance transacted 27.2 million units worth N68.3 million.
When the market closed for the day, the All-Share Index (ASI) went up by 72.21 points to 166,129.50 points from 166,057.29 points and the market capitalisation gained N31 billion to N106.354 trillion from N106.323 trillion.
By Adedapo Adesanya
It was a positive ending for the Naira this week after it further appreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, January 16 by N1.33 or 0.09 per cent to sell for N1,417.95/$1 compared with the previous day’s N1,419.28/$1.
The domestic currency also gained N2.41 against the Euro in the official market to close at N1,647.51/€1 versus the preceding session’s closing price of N1,649.92/€1, however, it suffered a N7.97 loss against the Pound Sterling in the same market window to trade at N1,901.32/£1, in contrast to Thursday’s closing price of N1,893.35/£1.
In the same vein, the Nigerian Naira depleted against the Dollar at the GTBank FX counter by N2 to quote at N1,427/$1 compared with the previous day’s N1,425/$1, but strengthened against the greenback at the black market yesterday by N5 to settle at N1,485/$1 versus the N1,490/$1 it was exchanged a day earlier.
Improved supply conditions helped keep the market within range as exporters’ and importers’ inflows in addition to non-bank corporate supply enhanced liquidity as the Central Bank of Nigeria (CBN) made no visible intervention.
Stronger external inflows from foreign portfolio investors (FPIs) and improving current account dynamics, continue to align with structural support in the wider economy.
Nigeria has seen projections of a stronger economic or gross domestic product (GDP) growth and lower inflation in 2026, with these forecasts citing improved macroeconomic fundamentals and reform impacts.
As for the cryptocurrency market, it was mixed following selloff in precious metals and lower US stocks appeared to be denting crypto sentiment.
Gold and silver, both of which also enjoyed big rallies earlier this week, tumbled 1.2 per cent and 5 per cent, respectively while key US stock indexes — the Nasdaq, S&P 500 and Dow Jones Industrial Average — all reversed from early gains to modest losses in Friday trade.
Dogecoin (DOGE) shrank by 2.2 per cent to $0.1370, Ripple (XRP) slipped by 0.8 per cent to $2.05, Ethereum (ETH) went down by 0.7 per cent to $3,228.56, and Bitcoin (BTC) slumped by 0.6 per cent to $95,086.80.
Conversely, Litecoin (LTC) appreciated by 3.2 per cent to $74.48, Solana (SOL) rose by 0.4 per cent to $143.70, Cardano (ADA) jumped by 0.2 per cent to $0.3942, and Binance Coin (BNB) increased by 0.1 per cent to $935.88, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher amid lingering worries about a possible US military strike against Iran, a decision that may still occur over the weekend.
Brent crude settled at $64.13 a barrel after going up by 37 cents or 0.58 per cent and the US West Texas Intermediate (WTI) crude finished at $59.44 a barrel after it gained 25 cents or 0.42 per cent.
The US Navy’s aircraft carrier USS Abraham Lincoln was expected to arrive in the Persian Gulf next week after operating in the South China Sea.
Market analysts noted that it doesn’t seem likely anything will happen soon. However, the weekends have become the perfect time for actions so as not offset the markets.
The market had risen after protests flared up in Iran and US President Donald Trump signalled the potential for military strikes, but lost over 4 per cent on Thursday as the American president said Iran’s crackdown on the protesters was easing, allaying concerns of possible military action that could disrupt oil supplies.
Iran produces approximately 3.2 million barrels per day, accounting for roughly 4 per cent of global crude production, so it was not a coincidence that markets rallied sharply through Tuesday and Wednesday as President Trump canceled meetings with Iranian officials and posted that “help is on its way” to Iranian protesters, raising fears of potential US military strikes that sent prices surging toward multi-month highs.
Weighing against those fears are potential supply increases from Venezuela.
The Trump administration is exploring plans to swap heavy Venezuelan crude for US medium sour barrels that can actually go straight into Strategic Petroleum Reserve (SPR) caverns, since not all all oil belongs in the reserve.
According to Reuters, the Department of Energy is considering moving Venezuelan heavy crude into commercial storage at the Louisiana Offshore Oil Port, while US producers deliver medium sour crude into the SPR in exchange.
Analysts expect higher supply this year, potentially creating a ceiling for the geopolitical risk premium on prices.
Some investors covered short positions ahead of the three-day Martin Luther King holiday weekend in the US.
-
Feature/OPED6 years agoDavos was Different this year
-
Travel/Tourism9 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz3 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking8 years agoSort Codes of GTBank Branches in Nigeria
-
Economy3 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking3 years agoFirst Bank Announces Planned Downtime
-
Banking3 years agoSort Codes of UBA Branches in Nigeria
-
Sports3 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn