How 13 banks posted N118b PBT in three months

A total of 13 Deposit Money Banks (DMBs) have declared a total of N118 billion as Profit before Tax (PBT) in three month of 2016 (Q1 2016).

According to our correspondent checks, the PBT declared by these 13 DMBs dropped by 13.4 percent or N18.2billion recorded in prior first quarter of 2015.

Surprising, Union Bank of Nigeria, one of the struggling financial institution in the country recorded a significant increase in PBT as it rose by 101.2 per cent to N4.7 billion in Q1 2016 from N2.38 billion in Q1 2015.

Followed by Access Bank Plc, that declared an increase of 37 per cent in PBT from N16.5 billion in Q1 2015 to N22.58 billion in Q1 2016.

The remaining DMBs covered by our correspondent recorded decline in PBT attributed to severe macro-economy challenges that include removal of public sector funds via the Treasury Single Account (TSA) that has impacted the deposit (liability) side of banks operations; removal of Commission on Turnover (COT) which has always boost banks operating income.

Other factors are unstable Central Bank of Nigeria (CBN) foreign exchange policy and declining income from loans/credit.

On the background of macro economy challenges, Unity Bank Plc announced the highest decline in PBT, dropping by 73.2 per cent to N972 million in Q1 2016 from N3.6 billion recorded in Q1 2015.

First City Monument Bank (FCMB) Group Plc announced a decline of 62 per cent in PBT to N2.2 billion from N5.8 billion in prior Q1 2015.

Ecobank Transnational Incorporated and Sterling Bank Plc also recorded a decline of 30.6 per cent and 32.4 per cent in PBT to N20.6 billion and N2.8 billion from N30.5 billion and N4 billion in Q1 2015.

Diamond Bank Plc announced a decline of 20 per cent to N6.69 billion; FBN Holdings Plc reported a dropped of 18 per cent from N26.9 billion to N22.05 billion while Wema bank Plc PBT dropped by 17.9 per cent to N505 million in three months of 2016.

Others are Fidelity Bank Plc’s 14.5 per cent in PBT to N4 billion while Guaranty Trust Bank Plc PBT dropped by 6.1 per cent from N32.65 billion to N30.7 billion.

Two major Tier I banks, Zenith Bank Plc and United Bank for Africa Plc announced a marginal decline of three per cent and 1.7 per cent in PBT respectively.

Zenith Bank PBT moved from N33 billion to N32 billion while that of United Bank for Africa stood at N18.08 billion in three months of 2016 as against N18.04 billion recorded in prior three months of 2015.

Analysts at Renaissance Capital had explained that shift in oil prices has impacted negatively on banks earning and the nation’s economy in general.

The research team of Renaissance Capital stated that Nigerian banks are facing significant asset quality risks that could crystallise in the near team.

According to the company’s report, “we now think the prolonged and continuous decline in oil prices presents the sector with unprecedented scenarios that risk management systems at both the banks and regulator would have to deal with for the first time on this scale of magnitude.

“The risks arise not solely from the impact of low oil prices on the direct lending the banks have made to oil and gas firms, but also from the ancillary impact this has had on economic growth, which has declined to 2-3 per cent from 5-6 per cent historically, and foreign exchange liquidity, which has materially affected the CBN’s ability to satisfy demand for foreign exchange.

“In our view, the challenge with managing these risks is not only that none of the banks assumed an economic scenario where foreign exchange becomes scarce, but that the longer the difficult conditions persist, we could see banks needing to recapitalise, or see forced mergers, with the regulator stepping in to coordinate the process,” the report added.