Proshare Confidential | |
Proshare Confidential | |
10978 VIEWS | |
![]() |
Wednesday, September 26, 2018
05.40PM / Temitope Babalola, Research Desk
Executive Summary
Financial intermediation in any economy is
largely impossible without any sound financial system. Moreover, with the
back dialing in the cycle, analyzing and taking an in-depth look into the
financial performance of banks have become inevitable.
Thus, this edition of the Proshare Confidential
looks at the performance of Deposit Money Banks (DMB’s) for the first half of
2018. Amongst many indicators that came to light, the study discovered
the growing dominance of corporate banking (product wise) and we also
highlighted the growing size of ‘the Treasury’.
The study showed an aggressive mobilization to
recover loans on the part of DMBs as they churned up N1,385 billion in total
interest income and N1,1278 billion in total operating income; which is 1.19%
and 1.09% of 2017 Gross Domestic Product respectively.
It appears that there is a
persistent tilt towards income from government securities from the DMB’s
either as a direct attempt to hedge against the possible dip in interest
income on loans or as a viable investment option given the economic realities.
Most DMB’s are preoccupied with reducing loan
assets and increasing the hold of treasury bills. This improves the amount of
liquid assets on the one hand and also improves their loan to deposit
ratio, as most DMB’s went to work to clean up
their balance sheet.
The recovery in oil prices coupled with the
ability to veer off the real economy has led to a diminishing in non-performing
loans. Therefore, they have been an improvement in the micro prudential
levels of the bank.
There current policy response to macro-economic
dynamics have forced DMB’s to resort to replenishments strategies -
locking into short term maturity, especially risk-free
instruments. This is largely reflected in their cash flow
statement(s), showing an improved pool of marketable asset; which reduces
the room of mismatch of risk.
The report showed a
strong correlation between low interest deposit expense and cost to
income ratio, banks with relatively low interest deposit expense ratio
have low cost to income ratio. Thus, banks with
relatively low cost of borrowed fund tend to have a low cost to
income ratio.
This would perhaps be the clearest justification
for the cautious attitude of DMB’s to the real
sector which remain a headwind to private
investment. It also hints to the fencing of financial
intermediation, especially to the informal sector.
The report highlighted
the softening in the interbank call rate as the
election cycle draws closer, underlining the
rising liquidity, thereby, forcing DMB’s to resort to indirect tools
to manage the rising liquidity.
As a follow through, the report also commented on the CBN’s intention to use its base money to create a scaffold for growth and reduce unemployment moving forward.
Previous
Proshare Confidential Report (s)
1.
AMCON and Financial Services Debt Burden in Nigeria – Jul 2018
2.
Poverty
Tracker and Nigeria: Raising The Red Flag – Jun 2018
3.
POCKET Economics: Addressing Income Inequality – May 2018
4.
The
Silent Drug Epidemic: A Gathering Storm - Apr 2018
5.
Judging
IMF’s Position on Development Indices – Mar 2018
6.
Money
Market: The Folk Road – Feb 2018
7.
The
Headache of Missing Targets – Jan 2018
8.
2018
Outlook on the Nigerian Economy: The Need for an Even Keel – Dec 2017
9.
Nigeria
External Economy and the White Noise of Import Dependency – Nov 2017
10.
States
and the Rising Weight of Debt – Oct 2017
11.
Money
Supply: Reeling from Policy Response – Sep 2017
12.
How
Rail and Energy Will Deliver a Robust Economy for Nigeria – Aug 2017
13.
Too
Big Government: The Hysteria of Developmental Quagmire – Jul 2017
14.
The
Nigerian Debt Conundrum and the Need for Automatic Stabilizers – Jun 2017
15.
Article
IV vs. ERGP - The Third Way – May 2017
16.
Lifting
The Veil off The Financial Sector – Apr 2017
17.
Towards
An Economic Model for Nigeria; Going Beyond Symptomatic Responses - The Panama
Model – Mar 2017
Related News
1. SkyeBank - The Rise, The Fall And The Bridge
2. CBN Revokes Skye Bank’s Operating Licence, AMCON to Capitalise the Established Bridge Bank
3. Skye Bank Plc: One Year After CBN Takeover
4. IFRS 9 No Threat to Nigeria Banks'' Regulatory Capital – Fitch
5. Asset Quality Replacing Foreign Currency Liquidity as Main Risk for Nigerian Banks - Fitch
6. Moody's: Outlook Stable for Nigerian Banks as Higher Oil Prices Moderate Foreign Currency Risks
7. ETI 2017 Results In Light Of Guidance From Fitch And PWC On Exchange Rates Per IFRS
8. Nigerian Banks Plan Market-Based Reporting of FC Exposure
9. Banks, MTN Engage CBN Over $8.1b Fine; Factually Incorrect Premises Highlighted
10. Nine FCMB Staff Declared Wanted Over Alleged Multi-Million Naira Customer Deposit Fraud
11. Honeywell Sues Ecobank N72bn For Damages After Failed Ex-parte
12. Ecobank Nigeria Ltd Outlook Revised To Stable On Group Support; 'B-B' Ratings Affirmed
13. Who Owns Legacy Shares After $864m Write Off At Ecobank; Post Securities Fraud
14. Nigeria-Based Zenith Bank 'B-B' And 'ngBBB-ngA-2' Ratings Affirmed; Outlook Stable
15. Nigeria-Based Guaranty Trust Bank 'B-B' And 'ngBBB-ngA-2' Ratings Affirmed; Outlook Stable
16. UBA Plc H1 2018 Conference Call and Earnings Presentation - The Key Takeaways
17. Zenith Bank Plc Announces Payment of Interim Dividend for Half of the Year Ended 2018
18. FBNH - Asset Quality Still A Concern; Improved NIR and Lower Impairment Loss Provision Boost Earning
19. Zenith Bank Plc to Hold its Board Meeting on Tuesday, July 24, 2018
22. STERLNBANK Declares N6.2bn PAT in Q2 2018 Results,(SP:N1.42k)
23. Sterling Bank Plc Set to Issue Up to N35bn Series 6 and Series 7 Commercial Paper
24. GTBank Q2 2018 Results Review: Buying Opportunity Post Recent Weakness
25. GUARANTY Announces Change in Date of Closure of Register of Shareholders
26. ETI Declares N51.55bn PAT in Q2 2018 Results,(SP:N26.00k)
27. Access Bank Plc H1 2018 Conference Call and Earnings Presentation - The Key Takeaways
28. Access Bank Reports Q2 2018 Results – PBT and PAT Both Declined by 23% YoY
29. ACCESS Declares N39.63bn PAT in Q2 2018 Results;Propose 25k Interim Dividend,(SP:N9.50k)
30. UBN Declares N11.46bn PAT in Q2 2018 Results,(SP:N5.60K)
31. Union Bank Plc FY 2017 and Q1 2018 Conference Call and Earnings Presentation - The Key Takeaways
32. FCMB: Credit Shrink Informs Revision to 2018 Estimate
33. Mid-tier Banks Show Solid Earnings Potential But Still Need to Recover From the 2016 Recession
34. FCMB Delivers A strong Set Of H1 2018 Results - ARM