Daily insight: Banking Sector – Still tracking the business cycle

Must Read

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...

Access Bank Plc Appoints Dr (Mrs) Ajoritsedere Awosika As Board Chairman; Mosun Belo-Olusoga steps down

The Board of Directors of Access Bank Plc is pleased to announce that its Chairman, Mrs. Mosun Belo-Olusoga will be retiring...

Kirusa Nigeria’s Country Manager Opens Up On Work-Life, Communication And Tech Adoption In Nigeria

Kirusa, is a global leader in communication solutions over data networks for consumers and enterprises, one of its key...
- Advertisement -
- Advertisement -

In Q1-18, banks earnings indicated that customer deposits improved modestly, loan growth remained modest, interest income came in weaker, and net interest margin contracted. Also, profitability was marginally weaker as higher Cost of Funds (CoF) pressured margins. Clearly, this should filter into H2-18 (as observed from the Q2-18 filings) amid sustained moderation in the yield environment, the poor appetite for loan growth and higher rates on deposits placement.

Daily insight: Banking Sector - Still tracking the business cycle

Also, while credit quality is seemingly improving for the tier-1 banks (NPLs ex-FBNH eased to 5.1%), tier-2 players, continue to struggle with high NPLs (averaging 9.3% in Q1-18). Additionally, Capital Adequacy Ratio (CAR) eased 0.9% across our coverage universe in Q1-18 as risk-weighted assets expanded, probably reflecting the forward-looking impact of the IFRS 9 adoption in Jan-18.

Read:  Daily Insight: How competition is reshaping the Nigerian Beer Market

Going into H2-18, we expect a slight uptick in the yield environment (compared to H1-18) to support interest income on government securities, especially for the tier-1 banks. We maintain our position that appetite for risk assets will be muted by events in the socio-political space as observed in H1-18. From all indication, the transition to IFRS 9 will pressure risk-weighted assets and lower CAR in 2018. Finally, we expect the lower yield environment to trigger local debt issuance by banks.

Read:  Daily Insight - Volatile Oil Market: A quick lesson for Nigeria

United Capital Research

- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

Boutir’s Facebook Extension Workshop in Kuala Lumpur

Brought Together Merchants to Drive Regional Connectivity KUALA LUMPUR, MALAYSIA - Media OutReach - 19 November 2019 -  Boutir Limited, a leading social mobile commerce solutions provider and multi-channel...

3D Printing Sentiment Index: USA leads as most advanced country in 3D printing

Inaugural research commissioned by Ultimaker shows positive growth potential for 3D printing on global scale FRANKFURT, GERMANY - Media OutReach - 18 November 2019 - Ultimaker, the global leader in desktop...

MR Bigg’s Raises The Bar In Customer Experience Delivery

Mr Bigg’s, the Quick Service Restaurants (QSR) being run by UAC Restaurants Limited is raising the bar of Customer’s lifestyle experience and excitement, as...

More Articles Like This