Five top Deposit Money Banks, which are in the league of first tier financial institutions, have boosted their profit after tax by N87 billion in 2016.
The banks – GTBank, StanbicIBTC Bank Plc – United Bank for Africa Plc, Access Bank Plc and Zenith Bank Plc increased their PAT by over 30 per cent or more at the end of the 2016 financial year-end.
GTBank’s PAT rose from N99.4 billion recorded at the end of 2015 to N132 billion by the end of 2016, representing about 33 per cent increase within the period under review. The board of the bank also awarded a dividend of N51.5 billion to its investors.
In the case of UBA, its profit after tax increased from N56.6 billion in 2015 to N72.2 billion at the end of the 2016 financial year, representing an increase of 22 per cent. The shareholders of the bank will be rewarded with a dividend of 55kobo per share.
Also, the bank’s other comprehensive income rose from N6.16 million to N65.88 million.
UBA had earlier paid an interim dividend of 20kobo per share to its shareholders, bringing the total dividend for the 2016 financial year to N0.75, an unprecedented yield of 13.9 per cent, based on the stock’s unit price of N5.39 on the floor of the Nigerian Stock Exchange.
The PAT of Stanbic IBTC Bank Plc increased from N18.8 billion in 2015 to N28.5 billion in 2016. Its gross earnings increased from N23.6 million to N156.42 million, while its non-performing loan stood at N18.7 billion in 2016.
While Zenith Bank’s PAT rose from N105 billion as at 2015 to N129.6 billion in 2016, Access Bank’s profit also witnessed an increase, from N65.8 billion to N71.3 billion, within the period under review.
These results could have be better but for the disruptive effects of the CBN’s foreign exchange policy, weak fiscal conditions of governments at all levels and the uncertainty in the economic policy space
THEY CAN DO BETTER – EXPERTS
Financial experts, who spoke with The Point, believe that in spite of the challenging domestic macroeconomic environment, the banks could do better with consistent favourable economic policies.
A professor of financial economics, Prof. Leo Ukpong, said investors expected the banks to perform better than they did, but for certain factors. He listed the factors to include the exchange rate volatility, policy inconsistency and the persistent fall of crude oil price in the global market.
“A lot of banks have huge nonperforming loans due to their exposure to oil firms, which couldn’t pay back on time due to the crash of crude oil price in the global market.
The operation of the Treasury Single Account by the Federal Government also affected their operations, as they were using the money generated as turnover. But when the issue of the TSA came up, they had to remit all government funds.
Declaring such profit despite these issues is commendable,” the analyst said.
However, some analysts expressed the belief that the banks’ fundamentals were still strong enough to withstand the present instabilities in the financial markets.
Going by some financial indicators, like inflation and interest rates, an economist with Global Essentials, Mr. Emmanuel Ekeh, explained that the harsh economic climate hindered the growth of businesses of creditors and debtors, thereby slowing their growth and creating unconducive business environment.
The analyst expects the institutions to witness more growth in their interest income, as they are likely to be primarily supported by elevated yields on fixed income securities.
He said, “As we expect a conservative loan book growth due to high credit risk, we expect a risk asset growth of seven per cent, which should be driven mainly by domestic currency loans.”
GOVT POLICY MUST BE CONSISTENT – SHAREHOLDERS
Shareholders in the banking sector have, however, blamed what they described as the declaration of ‘small dividend’ by the banks on the Federal Government’s lack of policy direction.
The Chairman, Shareholders Trustees Association of Nigeria, Alhaji Muktar Muktar, said that the only way the bank’s PAT and dividend payout could increase significantly in 2017 was for the government to clarify its policy direction, to enable investors make strategic investment decisions.
Muktar said, “The Central Bank of Nigeria has been doing well in recent time, but it needs to do more in the area of foreign exchange policy, by putting an end to administrative controls and allocation of forex. This is necessary to minimise disruptions of economic activities, caused by the current foreign exchange regime.
“Recent efforts at improving fiscal viability of government should be sustained to boost government revenue and reduce fiscal leakages. If that is not done, most of the bank’s profit might dwindle by the end of 2017 and that clearly indicates that shareholders should not expect much on returns on investment this year,” he said.
Another shareholder of the banks, Mr. Boniface Okezie, blamed the value of their dividends on a tripod: the disruptive effects of the CBN’s foreign exchange policy; weak fiscal conditions of governments at all levels and the uncertainty in the economic policy space.
To him, the policies are harsh for the banks to operate under. He said, “The tight exchange controls have made access to foreign exchange difficult for banks and investors across all sectors.
We might not see the effect on the 2016 result but it would reflect in the 2017 financials if the government remains adamant. The situation is much worse for sectors whose inputs are on the list of the 41 items not valid for foreign exchange. Even for firms whose inputs are valid for forex, access is still an issue. Many production processes have been crippled as a result of the development.
“The fiscal condition of government at all levels, which has deteriorated, as a result of the sliding oil prices, has also taken its toll on all sectors, including the banks and the manufacturing sector. Salaries are not being paid, with attendant implications on the purchasing power of workers.”
In all of these, Okezie stated that shareholders would bear the brunt, as they were at the receiving end, noting that some of the affected companies might not be able to pay dividends at the end of the financial year if there were no meaningful interventions.
FUTURE BRIGHT – BANKS
However, the financial institutions have assured their stakeholders, especially shareholders, that their investments are safe and that the companies will ensure that the current recession does not affect their RoI.
The Managing Director, GTBank, Mr. Segun Agbaje, assured that the bank was building a reputation for innovation, engagement and traits that would help it become a favourite among young people in Nigeria, and around Africa.
“The future of the bank is brighter than what most people imagined, because we are ready to cater to the needs of both depositors and shareholders beyond expectations,” he added.
The Managing Director, UBA Plc, Mr. Kennedy Uzoka, said, “We are leveraging on our unique pan-African platform to drive new customer acquisition and grow market share across our African subsidiaries. We will continue to balance our appetite for growth and profitability with the strategy of sustaining strong liquidity and capital ratios.”
