Daily insight: Banking Sector – Still tracking the business cycle

Daily insight: Banking Sector - Still tracking the business cycle

Must Read

Lagos Embarks On “Operation Show your Planning Permit” (Photos)

In a bid to curb the menace of illegal building construction and building collapse, the Lagos State Government, through...

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...

Top 10 Most Expensive Universities In Nigeria

For many Nigerians, high-quality higher education is a luxury. There are many private universities who are known not only...
- 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:  World Malaria Day: Mosquito nets as most effective way to prevent Malaria

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 - Nigeria’s Budget: How Far, So Far?

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

Getting Your Workplace Ready For COVID-19

In January 2020 the World Health Organization (WHO) declared the outbreak of a new coronavirus disease in Hubei Province, China...

WHO Steps Up Action To Improve Access To Safe Blood

The World Health Organization’s new action plan to speed up universal access to safe blood and blood products pulls together existing recommendations and recommends...

Google And Flutterwave To Train 5000 SMEs Across Nigeria

Next week, Google Nigeria, in partnership with digital payments company Flutterwave, will kick off a series of business clinics aimed at helping 5000 merchants...

Emergence of Max.NG in Ibadan – Origins, Implications, Projections

After establishing its presence across four locations in Nigeria and barely a month after the Lagos Okada ban, Max.ng, the pioneering bike hailing company...
%d bloggers like this: