The banking industry has been seriously affected by the numerous measures that the regulatory authorities have had to introduce in order to deal with the negative impact of the falling oil prices on the Nigerian economy.
These measures have affected the way banks operate, and have in a lot of cases eroded the revenue base of many banks. Most importantly, they have raised concerns regarding the performance of the loan portfolio of banks, especially in sectors that are most hit by the problems in the economy.
This prompted the Central Bank of Nigeria (CBN) to ask banks to conduct stress testing of their loan portfolios to ascertain the impact of the drop in oil prices on their capital adequacy and liquidity ratios.
Even without taking into consideration mitigation factors like hedges and collateral that FSDH Merchant Bank has put in place, the performance of its loan portfolio, even at a very low oil prices, is very good, said Rilwan Belo-Osagie, managing director.
“We have also extended the stress test to our 2015 balance sheet (that is incorporating the budget for 2015). The result also shows strength in our balance as our capital adequacy and liquidity ratios remain far in excess of the prescribed minimum requirements under the CBN’s newly adopted Basel II guidelines.
“Last year marked the bank’s second year of operations as a merchant bank. As a phase in the growth stage of its operation as a merchant bank, it was both exciting and challenging,” according to Osaro Isokpan, chairman of the bank.
It was exciting as the bank continued to explore and expand relationship with its customers in its carefully selected industries. “We increased and deepened our support to our customers in the areas of trade finance, foreign exchange trading and lending,” he said.
According to him, the challenges experienced during the year were mainly in the area of contractionary monetary and fiscal policy stance of the CBN and the Federal Government.
Considering that the slide in oil prices could have stifle lending activities to the oil and gas sector and economy in general if not checked, the bank, as a precaution has reviewed its lending to that sector and has concluded that it will continue to exercise caution in its risk asset creation.
“We will continue in our time tested conservative approach where risk assets are concerned in order to ensure that we continue to build a portfolio of risk assets that will stand the test of time,” Isokpan said at the annual general meeting held in Lagos.
FSDH Group recorded a profit before tax (PBT) of N3.64 billion for the financial year ended December 31, 2014, representing an increase of 76.33 percent over the profit before tax of N2.07 billion for the year ended December 31, 2013.
Profit after tax of the group rose to N3.028 billion, which is 15.72 percent above the N2.62 billion for the previous year.
At the end of 2014 financial year, the FSDH Group had a total asset size of N114.5 billion.
The size of the group’s shareholders’ funds stood at N25.4 billion as of December 31, 2014, a 7 percent increase from the position of N23.7 billion for the financial year ended December 31, 2013.
However, the shareholders comprising of Mainstreet Bank Limited, Ecobank Nigeria plc, KMC Investments Limited, Stambic IBTC Bank plc, Unity Bank plc, and UBA Asset Management Limited, among others, were impressed about the dividend payment of N747.61 million for the year ended December 31, 2014.
HOPE MOSES-ASHIKE
