Access Bank Nigeria Plc has recorded the fastest profit expansion among its peer rivals as total assets soared after it acquired Caryle Group LP-backed Diamond Bank Plc.
Access Bank’s net income increased by 86.05 percent to N41.14 billion in the first quarter of 2019.
That compares with United Bank for Africa (UBA), (+20.76); Fist Bank Holdings, (+6.97) and Guaranty Trust Bank (GTBank) , +10.37 percent.
A precipitous drop in short term government securities last year resulted in reduction in interest income on investment securities that have been adding impetus to earnings.
However, there is light at the end of the tunnel because yields have been attractive post elections as the central bank continues to mop up excess liquidity with a view to curbing inflation.
But that means lenders will continue to refuse to turn on the tap of lending to the economy as they are yet to recover from the deteriorating asset quality brought on by a sharp drop in crude oil price that hindered customers from meeting their obligation.
For instance, Access Bank’s recorded the fasted jump in interest income among peers, but the growth was supported by a 458.98 percent surge in interest income from investment securities whilst interest income from loans and advances dipped by 21.32 percent as at March 2019.
Fitch Ratings have said that a 50bp cut in Nigeria’s monetary policy rate to 13.5 percent is unlikely to spur substantial growth in lending to priority sectors or wean banks off investing in Nigerian Treasury-bills (T-bills).
The agency said they expect credit demand to stay weak and banks to continue favouring T-bills, as interest rates are still high.
Fitch also admitted that lending is also inhibited by banks’ risk aversion given their high proportion of non-performing loans (NPLs), and by the Central Bank of Nigeria’s (CBN) actions to mop up excessive liquidity in a bid to contain inflation and support the naira.
“We forecast loan growth to pick up slightly, given more favourable operating conditions, an easing of NPLs and greater FX availability,” said Fitch.
“However, we believe lending growth over the medium term will ultimately depend on banks’ continued recovery from weak asset quality and capital stemming from the 2015 oil price crash, and structural reforms such as lowering of cash reserve requirements and easing of open market operations to enable banks to deploy their liquidity to lending,” said Fitch.
Drilling down the first quarter financial statement of big lenders shows
GTBank’s loans and advances to customers increased by a mere 1.78 percent to N1.28 trillion from a year ago while UBA’s loans and advances to customers by reduced by 1.49 percent to N1.68 trillion in March 2019 from a year ago.
First Bank Holdings’ loans and advances were down by 0.59 percent to N1.67 trillion in the period under review from N1.68 trillion as at December 2017.
BALA AUGIE
