By Kelechi Mgboji
Assistant Business Editor
Unaudited profit before tax of 13 banks dropped 13.4 per cent to N118 billion in first quarter of 2016 (Q1 2016) as against N136.2 billion they recorded in Q1 2015.
No thanks to the implementation of the Treasury Single Account (TSA) which stripped banks of slush government funds, removal of commission on turnover (CoT), rigid foreign exchange (forex) policy of the Central Bank of Nigeria (CBN) in the last 16 months, and declining income from loans/credit.
These factors and more combined to erode the earnings of Union Bank, Access Bank, First City Monument Bank (FCMB), Ecobank, Sterling Bank, Diamond Bank, First Bank, Wema Bank, Fidelity Bank, Guaranty Trust Bank (GTBank), Zenith Bank, United Bank of Africa (UBA), and Unity Bank.
Union Bank recorded a significantly improved profit before tax (PBT) which rose 101.2 per cent to N4.7 billion in Q1 2016 from N2.38 billion in Q1 2015.
Access Bank also announced improved result with increase of 37 per cent in profit, from N16.5 billion in Q1 2015 to N22.58 billion in Q1 2016.
The other banks recorded declines in PBT in Q1 2016 from Q1 2015, ranging from severe to mild.
• Unity Bank – 73.2 per cent to N972 million from N3.6 billion.
• FCMB Group – 62 per cent to N2.2 billion from N5.8 billion.
• Ecobank – 30.6 per cent to N20.6 billion from N30.5 billion.
• Sterling Bank – 32.4 per cent to N2.8 billion from N4 billion.
• Diamond Bank – 20 per cent to N6.69 billion.
• FBN Holdings – 18 per cent from N26.9 billion to N22.05 billion.
• Wema Bank – 17.9 per cent to N505 million.
• Fidelity Bank – 14.5 per cent to N4 billion.
• GTBank – 6.1 per cent from N32.65 billion to N30.7 billion.
• Zenith Bank – 3 per cent from N33 billion to N32 billion.
• UBA – 1.7 per cent from N18.04 billion to N18.04 billion.
Renaissance Capital had explained that the slump in oil prices has impacted negatively on banks’ earnings and the economy in general.
It said Nigerian banks are facing significant asset quality risks that could crystallise in the near team.
It warned in a report that “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.”