…Key economic metrics of lenders may crumble further —Analysts
As the coronavirus pandemic continues unabated, causing panic and hurting economies of various countries, seven commercial banks have recorded over N31tn in the first quarter of 2020.
This was against the N27.803tn which the banks reported at the same period in 2019.
The banks are Access Bank, Zenith Bank, United Bank for Africa, GTBank, Stanbic IBTC, Fidelity Bank and First City Monument Bank.
A detailed analysis of the banks’ three months’ financial statements showed that Access led others in total asset base with N7.146tn in 2019 to N7, 280tn in the review period of 2020, an increase of 1.88 percent.
Zenith followed with 21.24 percent increase in total asset, from N5.879tn in 2019 to N7.127tn in 2020, while UBA with a total asset base of N5.604tn in 2019 grew to N6.351tn in 2020, an increase of 13.33 percent.
For GTBank, its total asset base grew by 7.94 percent from N3.758tn in 2019 to N4.057tn in the Q1 of 2020. Stanbic IBTC grew its total asset marginally by 29.37 percent to N1.876tn in 2019 compared to N2.427tn the bank presented to the investing public in Q1 of 2020.
Fidelity Bank’s total asset base grew by 20.14 percent from N1.870tn in first quarter of 2019, to N2.246tn in the review period of 2020, while FCMB recorded a 13.16 percent increase in total asset, from N1.667tn in 2019, to N1.888tn in Q1 of 2020.
Commenting on the results, market pundits and capital market operators said, given the challenges of the operating environment amid the COVID-19 crisis, the uncertainties in the year, the banks would have done better.
A professor of Economics, Basil Adekome, said the reason the banks reported marginal increase in all key financial metrics was because the economy was already in a bad shape before the COVID-19 pandemic, adding that the country’s annual GDP grew by 1.8 percent on weak non-oil sector performance, which equally affected not only the banking sector but all other economic indices.
“Apart from that, the commercial banks play the role of intermediary between borrowers and lenders in the economy; that means, it is only when the banks are doing fine that the economy will grow. So it is not surprising that the banks could not perform more than they did in the three months of 2020.
“Even in terms of deposit base, it is only when people have money that they smile to the bank. So deposit base of the banks may not record impressive performance, even in the second quarter.
“If you look at the risk asset of the banks too, they were careful not to give money out, because it is better for them to hold the money, than to give out money to people who may not be able to pay back, and that was why they did not grow their risk assets in the first quarter. It may even be worst in the second quarter of the year, with a significant drop, not just in their revenue but in their bottom-line variation,” said Adekome.
A renowned stockbroker, Johnson Adekoya, said explained, “I would advise them (investors) to look out for the banking sector, especially the ones that have just declared their results. They should look at the others that have yet to release their results. They are all in price earnings’ ratio that is below five.”
Commenting, Head of Research and Strategy, FSDH Merchant Bank Limited, Ayodele Akinwunmi, said there were pressure points in the economy that the federal government must quickly address in order to stimulate broad-based and inclusive growth.
According to him, the economy has not been expanding enough to lift its citizens out of poverty, stressing there is the need for the economy to expand faster than it is doing at the moment.
“Overall, despite the headwinds and the fact that 2019 presented a tough operating environment for the industry, we remain optimistic on the fundamentals underpinning our long-term retail-led business strategy,” he said.
A capital market operator, Ubong Ekanem, said foreign exchange speculators, who had converted their naira to the dollar, were now re-converting to naira in order to invest in fixed income securities market.
He said, “People have been observing the development in the forex market. We have observed, for over four months that the CBN has emphasised that it will continue to intervene. Some of these policies have in one way or the other affected the banks’ performance generally.”
Speaking on the manufacturing sector, Director General of the Lagos Chamber of Commerce and Industry, Dr. Muda Yusuf, said Nigerian manufacturers were also feeling the heat of the pandemic as it adversely affected access to critical raw materials needed to sustain operations.