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Press Releases for Earnings Report for Intercontinental, Oceanic Bank, and Fidelity Bank

This week, 3 of the major banks released their results. As expected, the results were very impressive. Here are the reports in the dailies.

I noticed that none of these banks had any press release on their results. The results sections of their websites hadnt been updated in a while. I hope they work on this.

Intercontinental Bank Gross Earnings Hit N121bn
Intercontinental Bank Plc has announced its unaudited financial results for the half year ended August 31, 2008, which saw gross earnings rising to N121billion, representing a growth of over 99 per cent against the N60.9billion achieved in the corresponding period of 2007. The result, which was made available to the Nigerian Stock Exchange yesterday, saw the bank’s profit before tax soaring to N24billion, an increase of 63 per cent from N14.7 billion in the previous year.

Financial analysts attribute the phenomenal growth in the bank’s earnings portfolio to robust customer confidence, while its customer base has been upbeat, due largely to aggressive drive for retail business. The Bank, early last year embarked upon a strategic repositioning drive to dominate retail markets across the country, leverage on its strong corporate finance business and massive market response to the bank’s consistent delivery on its brand promises to make customers happy with excellent banking services.

The effective delivery of its business model introduced in 2006 to drive businesses across geographical and sectoral divergence of the banking public has also helped in growing its earnings. The Group Chief Executive, Dr Erastus Akingbola, said the exceptional performance represents a bold step in the bank’s global strategy of benchmarking the best financial institution in the international arena, while positioning to become the number one bank in Nigeria among top five in Africa and top 100 in the world by 2011.
Fitch Ratings recently affirmed the Bank’s National Long-term ratings at A+. The interpretation, according to analysts, is that the bank is a low risk financial institution. The Agency also affirmed the bank’s international rating at B+, which is the highest for any Nigerian bank, as at the date by Fitch Ratings.

Oceanic Bank Posts N52.2 Billion Profit
Oceanic Bank International Plc has posted a profit before tax (PBT) of N52.23 billion for the fourth quarter-ended September 30, an increase of 127 per cent, in contrast to N23.01 billion posted in the corresponding period last year. The bank’s earning rose by 101 per cent to N150.9 billion as against N74.94 billion made last year, confirming its leadership position in the industry.

While its Profit before tax (PBT) rose by 127 percent to N52.23 billion, its Profit after tax (PAT) increased by 135 percent to N41.24 billion in contrast to N17.54 billion in 2007. A total of N11 billion was paid as tax to the government indicating an increase of 101 percent over N5.47 billion paid the previous year.

Chief Executive Officer of the bank Dr. (Mrs.) Cecilia Ibru speaking on the fourth quarter result said the high turnover and profitability are the manifestation of strategies put in place by the management to take the bank to a greater height. She assured that the bank would ensure bumper returns on investments of its shareholders while rendering the best services available in the industry to its teeming customers. Oceanic, she assured, would be the best bank in all ramification.

The performance reflects Oceanic Bank’s track record of consistent and superior performances over the years. For instance, the bank earned N106.7 billion in the third quarter of 2008 over N47.52 billion in the same period in 2007. Profit before tax for the third quarter rose to N40.7 billion; representing an increase of 148 per cent growth from its previous year figure of N16.4 billion, the bank posted N33.6 billion profit after tax as against N13.6 billion made in the preceding year.

Profit after tax (PAT) moved in tandem with other fundamentals as it went up by N19.98 billion or 147 percent to N33.61 billion in contrast to N13.63 billion posted in 2007. The bank the financial year on a positive note, posting a gross earnings of N66.47 billion in the first six months. This represented an increase of 129 per cent over its gross earnings of N29.08 billion recorded in the corresponding period of 2006/2007 financial year. Profit after tax for the period also increased to N20.30 billion from N8.28 billion indicating a 145 percent growth

Fidelity Bank Profit Rises By 259%
Fidelity Bank’s leadership aspiration in the Nigerian banking industry has received a boost with the result of her last financial year which was released on the floor of the Nigerian Stock Exchange yesterday after approval by all the relevant regulatory bodies. The result, which was for the year ended June 30, 2008, showed a robust improvement on all indices of growth.

Profit Before Tax shot up a record 259 per cent from N4.41 billion to N15.80 billion, while Profit After Tax rose 212 per cent  a significant leap from N4.16 billion in the previous financial year to N12.99 billion in the period under review. Similarly, Gross Earnings moved up by 72 per cent from N23.63 billion to N40.47 billion while Shareholders’ Funds shot up by 357 per cent from N29.76 billion to N135.86 billion in the period.

This, in the opinion of market analysts, has placed Fidelity Bank among the nation??s most capitalised banks, with the capability to handle large ticket transactions. The size of the bank, as indicated by the Total Assets, also appreciated by 146 per cent, moving from N217.14 billion to N533.12 billion. The bank’s earnings per share also showed a remarkable growth of 77 per cent, rising from 25k to 45k during the review period.

The performance of the Group was no less impressive with Profit before Tax climbing by 219 per cent from N5.11 billion to N16.31 billion and Profit after Tax up by 183 per cent from N4.71 billion to N13.36 billion in the period under review. Similarly, Gross Earnings of the Group also went up 72 per cent from N24.86 billion to N42,66 billion while Earnings per Share moved from 29k to 46k.

Group Shareholders?? funds increased from N30.101 billion to N136.372 billion while Group Total Assets doubled from N218.332 billion to N535.480 billion. Fidelity prides itself one of Nigeria’s strategically managed institutions, with “a record of integrity and professionalism”. The bank’s measured ??but definite steps have helped it in becoming a notable financial services supermarket, with subsidiaries in investment banking as well as pensions management.

The impressive performance, according to analysts, is also attributable to the bank??s vast improvement in information technology infrastructure which saw a massive deployment of modern ATM network, as well as ambitious branch expansion programme that has seen new Fidelity branches spring up in many areas of the country where the bank was hitherto thin on the ground.

Fidelity Bank recently marked its 20th anniversary with a Save & Fly Promo, which seeks to reward its customers with over one million attractive gifts and prizes. Lately, Fidelity has also emerged among the nation’s most socially responsible companies, supporting the environment and the arts and has garnered many awards in acknowledgement of their contribution in this area.

According to the Managing Director & Chief Executive of the Bank, Mr. Reginald Ihediahi, the performance is merely an indication of the possibilities in the bank.

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Zenith Securities’ take on First Bank and GT Bank

You can read here Zenith Securities’ take on First Bank and GT Bank:

ZSL - Spotlight on GTBank (Oct ‘08) (47)
ZSL - Spotlight on First Bank (Oct ‘08) (30)

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Afrinvest Report On Nigeria’s Non-Financial Sector

Afrinvest has released a report on some non-financial sector companies in Nigeria. You can read it here:
Afrinvest Report on The Nigerian Non-Financials Sector (2008) - Pt.1 (64)
Afrinvest Report on The Nigerian Non-Financials Sector (2008) - Pt. 2 (128)

They also prepared reports on the banking and insurance sectors earlier in the year. You can also read those here:
Afrinvest 2008 Nigerian Banking Sector Report (76)
Afrinvest 2008 Nigerian Insurance Sector Report (54)
Some of the main points in their non-financial sector reports are:
Historically, the industial corporations used to be the main stay of the Nigerian economy.
Factors for the reduced emphasis of the non-financial secotr:

1. The emergence of banks on the public equities scene and the rapid growth in thier earnings and valuations has made the banks the dominant factors in the NSE.
2. The Nigerian economy has become more transactional rather than productive.
3. The financial services sector has been quicker to the see the benefits of the macroeconomic policies of the government.
4. Industrial corporations have not been active in issuing new shares creating a general lack of trading liquidity in their stocks relative to banks.

Reasons for the slow growth of the non-financial services sector:

1. The crippling effect of the epileptic power system resulting in increased costs of doing business.
2. The global food crisis.
3. Higher interest rates.

Opportunities:

1. Relative political stability
2. Increased consumerism

The companies covered are:

1. Building and Construction Sector:
2. Ashaka Cement Plc
3. Benue Cement Company Plc
4. Cement Company of Northern Nigeria Plc
5. Lafarge Cement Wapco Plc
6. Julius Berger Plc

Consumer Goods Sector:

1. 7-UP Bottling Company Plc
2. Dangote Sugar Refinery Plc
3. Flour Mills of Nigeria Plc
4. Guinness Nigeria Plc
5. Nestle Nigeria Plc
6. Nigeria Bottling Company Plc
7. Nigerian Breweries Plc
8. P Z Cussons Nigeria Plc
9. U A C of Nigeria Plc
10. Unilever Nigeria Plc

Healthcare Sector:

1. Glaxo Smithkline Plc
2. May & Baker Plc
3. Nigerian-German Chemicals Plc

Chemical and Paints Sector:

1. Berger Paints Plc
2. CAP Plc

Petroleum Marketing Sector:

1. African Petroleum Plc
2. Chevron Oil Plc4
3. Conoil Plc
4. Mobil Oil Nigeria Plc
5. Oando Plc
6. Total Nigeria Plc

Others:

1. Japaul Oil & Maritime Services Plc
2. R T Briscoe (Nigeria) Plc
3. Starcomms Plc
4. Vitafoam Plc

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Must read! Analysis of the Nigerian Banking Sector By Economist Magazine

Below are the excerpts of an article in a recent copy of The Economist magazine analyzing Nigerian banks. And it doesnt paint a rosy picture at all.

The prices of the banking stocks have been dropping all year. They alluded to a research by JP Morgan Chase (you can read it here) which stated that the banks, with a combined value of over $40billion are about 56% overvalued.
Some of the problems identified in the article are:

1. Lack of transparency. The example of UBA which was fined over $15m by the US banking regulations is cited.
2. Weak regulations.
3. Shady bank practices - banks lending money to investors to buy shares from the banks which result in the rise in their stock prices.

Yet share prices have been dropping throughout 2008, suggesting a lack of confidence. Would-be investors have started to eye Nigeria’s banks, in particular their regulatory practices, more warily. Some wonder whether the apparent gains of the past few years are all they seem. “The foundation is not there, it’s weak,” says an analyst, Osaruyi Orobosa-Ogbeide, of a Lagos-based firm, Financial Derivatives.

Though banking standards have certainly risen a lot in recent years, they still lag behind those of America and the European Union, particularly in terms of transparency. In April, United Bank for Africa, one of the country’s biggest, fell foul of American regulators who served the bank with a $15m fine for ignoring anti-money-laundering regulations despite several warnings. “There’s no resemblance at all between operating in Britain or America and operating in Nigeria,” says Fola Fagbule, a research analyst with Afrinvest. “It’s light years apart, and it’s an issue [the banks] need to address”.

The top seven Nigerian banks, with a combined market value of almost $40 billion, are overvalued by as much as 56%, according to a report published in May by JPMorgan, an American financial-services company. Part of the problem is that banks have used their own money to push up their stock prices by engaging in risky lending to corporations and individuals who invest in the banks’ own shares.

Those in charge of imposing some order on the sector have also been found wanting. After share prices began to fall earlier this year, the central bank set a floor on trading in a bid to buoy the market. Investors were left with no choice but to hold on to stocks; that unnerved many of them. Bismarck Rewane of Financial Derivatives described the action as “a disorderly intervention in a chaotic market.”

Lamido Sanusi, a risk-control officer who will take over next January as the head of Nigeria’s oldest bank, First Bank, is disappointed that regulators are not tougher in insisting on transparency and disclosure of information. Foreign investors demand open banking procedures, he says, yet banks are not now obliged to open their books to scrutiny. “Are these banks being properly managed? Are these assets being properly deployed?” asks Mr Sanusi. “We don’t know the reality.”

Nigeria is sub-Saharan Africa’s second-biggest economy after South Africa’s and the world’s eighth-largest oil exporter, yet the continent’s most populous country (with 140m-plus citizens) has yet to fulfil its economic potential. A robust banking sector that everyone can have confidence in is essential; the country’s reformers and regulators cannot rest on their laurels.

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JP Morgan’s Analysis of Nigerian Banks

Here is JP Morgan’s Analysis of Nigerian Banks. I will add some comments and notes later.

JPM Nigerian Banks Research Report (219)

Update:
Here are my comments and summary of the article:

1. Believes that stocks in the banking sector are expensive on both an absolute basis and relative to emerging market peers. The believe that they are overvaluated up to about 56%.
2. Recommended an Overweight (BUY) position in GTB, Neutral (HOLD) on Zenith, Union Bank, and Oceanic, and Underweight (SELL) on Intercontinental, UBA, and First Bank.
3. Expect a return in the range of 27% for GTB to negative 40% for First Bank.
4. Believe that the banks are sufficiently capitalised to support strong EPS growth.
5. The continued vulnerability of smaller banks may pose systemic risks to the Nigerian banking system.

Are negative on the Nigerian banks for the following reasons:

1. Valuations appeared stretched.
2. Capital raising has been used to fund growth while internal growth capability is low.
3. Continued intensification of competition.
4. The risk of sharp increase in non-performing loans has increased as private sector credit increased 98% in 2007.
5. Earnings growth visiblity is low.
6. Growth has moved ahead of the risk capabilities of both the banks and regulator.
7. Growth opportunity in the retail market may take longer to realise than the market is presently expecting.
8. The stock market has been driven by a hot-house effect, movinig ahead of fundamentals.
9. Bank prices do not sufficiently reflect the difficulties imposed by a lack of infrastructure, high levels of systemic risk as well as general economic and political risk.

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CBN shifts deadline for banks adoption of common year end

The Central Bank of Nigeria (CBN) yesterday shifted the deadline for Banks to adopt a uniform accounting year end to December 2009. This according to CBN was in response to “irrational behavior” of some banks in their attempt to mobilize deposits. The direct impact of this announcement could at least ease the current strain in liquidity created in a bidding continuum following the banking industry’s battle for deposits.

This could unravel a long sought key to unlock institutional funds. The key to market recovery in our view remains a total change in general mindset. We perceived that prevailing sentiment has been largely speculative and short-term, which has consistently denied the market the so desired rally and momentum. We can’t conclude without pointing out that this has, in a way, present opportunities for investors seeking long positions as some equities are currently trading in their oversold bands. Here is CSL Securities’ view of the impact of this announcement:

In our opinion, The CBN postponement by one year for banks to converge their year end may offer a respite both for the banking sector directly and also the capital market as the sector constitutes above 60% of the market capitalization of the Nigerian Stock Exchange. While the banks may heave a sigh of relief, stakeholders, especially Nigeria’s foreign partners and investors may worry about the credibility of CBN or question the decision-making process of the industry regulator, as policy somersaults have been the bane of the country both in the past and in the present times.

It can be hoped that Nigerian banks will put on their thinking caps to utilize this window of time extension to ensure an orderly convergence without doing damage to the banking sector and the economy as a whole. We also hope that regulatory authorities and managers of the Nigerian project will be more consultative and engaging with industry operators and stakeholders in making major policy decisions that impact on the economy.

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The Rise Of Nigerian Banks

Nigerian banks have been fairing well of recent. Oceanic Bank, UBA and GT Bank were among the banks that the most significant rises in the last year. Oceanic Bank leaped 565 places to now be ranked the 310th top bank in the world while UBA, GT Bank and Access Bank are ranked 392nd, 369th and 359th respectively. I more surprised by the performance of Access Bank. I wasnt expecting them to be so highly ranked. The rankings of other banks will be posted as soon as they are received. Here is an excerpt of the report from The Banker Magazine:

At first and second place were Nigerian banks. Oceanic Bank leaped a staggering 565 places up the rankings from 875 in last year’s rankings to 310 in 2008. The bank’s Tier 1 capital exploded from a meagre $297m to $1.75bn. United Bank for Africa also made spectacular strides, jumping 484 places to 392, with a growth in Tier 1 capital from $296m to $1.25bn.

A third Nigerian bank, Guaranty Trust Bank, also made it into the Top 10 in 2008. It registered Tier 1 capital of $1.38bn, up from $406bn last year, and soared 371 places in the rankings to 369. Nigerian banks’ phenomenal growth was triggered by laws passed in 2005 setting a minimum capital requirement of about N25bn ($195m). The legislation was followed by a consolidation of the banking sector from 89 banks in 2005 to 24 banks today.

In a separate report, The Banker Magazine also reported that Nigerian banks are seriously catching up with their South African counterparts:

The total Tier 1 capital of Nigerian banks in the Top 1000 has more than doubled to $11.29bn in 2008’s rankings from $5.38bn in 2007. It takes Nigeria’s share of the sub-Saharan pie to 34% of total Tier 1 capital, up from 24% in 2007. South Africa’s share of the pie has fallen from 71% last year to just 62% in 2008.

New entries among the world’s Top 1000 banks are Platinum-Habib Bank and Access Bank. In terms of growth, it is Access Bank that has impressed the most. In 2007, it did not even feature in the Top 1000 World Banks, and yet this year it enters the league at number 359, with Tier one capital of $1.43bn.

Other impressive performers this year include Oceanic Bank, which shot up the rankings from 875th in the world in 2007, with Tier 1 capital of $297m, to 310th in the world today, with Tier 1 capital of $1.75bn.

Guaranty Trust Bank also performed well. It leaped 371 places in the global rankings to 369th, with Tier 1 capital of $1.38bn, up from $406m last year. United Bank for Africa also made good headway in the rankings. It is now the 392nd biggest bank in the world with Tier 1 capital of $1.25bn. This is up from 876th place last year, when it had just $296m in Tier 1 capital.

The next step for Nigeria’s banks is to convert such phenomenal capital growth into profits. This year’s figures show that despite such enormous growth, return on capital for the sector has actually fallen from 21.9% last year to 18.6% this year. In South Africa, however, return on capital leaped from 38% to 42%.

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JP Morgan’s Analysis of Nigerian Banks

JP Morgan recently prepared an extensive report analyzing the top Nigerian banks.You can read the report here.JPM Nigerian Banks Research Report (219)
The major points are:

1. Nigerian banks appear expensive on a relative and absolute basis
2. Nigerian banks’ earnings growth is likely to outstip most other emerging markets over the next few years
3. Nigeria is one of the riskier emerging markets
4. The P/E ratio is expected to converge to other emerging markets
5. Oceanic bank is rated as a lower quality/high risk operation compared to its peers
6. GTB is the top pick as it is the only bank of the top 7 offering positive share price performance on a 12 month view while First Bank and Intercontinental are the least preferred of the top banks
7. Zenith and GTB have the higest quality operations while Union Bank has the lowest quality operation
8. Concerned that the risk management capability at Oceanic and Intercontinental Banks have not kept pace with their robust growth
9. Expect an average negative return of 21% for the top 7 Nigerian banks

Strengths
- Continued strong economic growth and sustained high oil prices
- Improving regulatory environment
- Presently well capitalised
- Increasing breadth of operations lowers risk to earnings because of diversification benefits
- Senior management teams at all teh banks are experienced bankers

- Weaknesses
- Lack of nationala identification system and lack of clearly functioning credit bureau
- Significant and widening gap between Nigerian banks and their international pairs in terms of valuation
- Untest risk controls
- Banks are a major portion of the NSE
- Lack of cross-border consolidated supervision

Opportunities
- Low penetration rates as evidenced by low deposit to GDP and loan to GDP ratios
- PPP projects to fund infrastructure spend
- Growth in retail segment
- More efficient capital structures
- Continued penetration of low cost retail deposits
- Improved efficiency

Threats
- Increasing competition has squeezed net interest margins
- Consolidation
- Growing NPLs
- Dependence on local investors
- Many of the banks depend on a few senior executives

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Ranking of Nigerian Banks

Here is the result of the latest ranking of banks based on a report compiled by ELI Business Services Support Limited and reported by the Punch Newspapers. The banks were ranked on their asset base, shareholder funds and deposits. UBA and Oceanic Bank were the 2 top performing banks.

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Changes at Afribank

Proshare NG is reporting that Mr. Osa Osunde is taking over as Chairman at Afribank replacing Aliyu Kola Belgore who retired as Chairman after 8years. Here is the report as well as the profile of the management team:

In line with its growth plan to constantly re-invent the bank for optimal performance, the Board of Afribank Nigeria Plc has approved the appointment of Mr. Osa Osunde, a notable corporate strategist and business technocrat, as the new Chairman of the 48 year-old financial institution. He is taking over from Alhaji Aliyu Kola Belgore, an accomplished banker, who retired as Chairman of the Bank on May 31st 2008 in line with the memorandum and Articles of Association of Afribank Nigeria Plc which stipulates a maximum eight-year tenure for non Executive Directors.

He is a fellow of Institute of Chartered Accountants of Nigeria (ICAN) and holds MBA (Management) form University of Calabar.

The Bank has also expanded its operational structure at the Executive level and strengthened its Enterprise Risk Management, Retail banking, Public Sector and market facing departments for competitiveness.

The expansion of the operational structure has led to the creation of Risk Management and Strategy as an executive portfolio. Consequently, the Bank beefed up its executive team with the appointment of a seasoned and widely experienced banker, Mr. Henry Arogundade, as an Executive Director in charge of the new portfolio. It also beefed up its management and middle level cadres with talented professionals in different aspect of banking to enable it grow the institution on all fronts and take a lead in the market.

The developments are part of the broad strategy designed to ensure that the huge resources available to the Bank following its successful recapitalization to =N=140billion capital base translate to superior performance and bountiful returns to shareholders.

The Bank has continued to implement the contents of its five-year strategic growth plan which is expected to lead to the holistic growth and competitiveness of the Bank in the post-consolidation era.

Osa Osunde
Osa Osunde, a consummate corporate player, is noted for his profound managerial skill and expertise in turning around fortunes of companies. He has demonstrated his ability to give focused leadership and vision in a number of companies he has served as Director.

He was a Council Member of the Nigerian Stock of Exchange. He has also used his wide experience in accounting, deep understanding of capital and money market operations, restructuring and market development to transform many firms to attain industry leadership.

His over 25 years experience in the corporate world which spanned finance, maritime, energy, agriculture and manufacturing, would  be brought to bear in his new role.

Market watchers are already hailing the appointment of Mr. Osunde as being eminently qualified to lead the new Board of Afribank. Corporate practitioners praised the decision of the Board of Afribank for choosing the caliber of Mr. Osunde, a serving Director, to lead the Board describing it as a right move to sustain the growth tempo of the financial institution. They expressed the view that the development would engender continuity in the policies that have successfully improved the fortunes of the Bank.

The new Chairman of Afribank has at various times served on the Nigerian Stock Exchange’s Quotations, Finance & General Purpose and Merit Award Committees. He is a member of the Capital Market Committee of the Securities & Exchange Commission.

He holds a Higher National Diploma in Accountancy. He is a fellow of the Chartered Institute of Stockbrokers. He is also a member of many prestigious professional institutions and business groups such as: the Institute of Management Consultants, the Nigerian Institute of Management, the Institute of Directors, the Association of Arbitrators of Nigeria, the Chartered Institute of Taxation, the Certified Institute of Pensions Management, the Institute of Administrative Management of Nigeria, the Nigerian-British Chamber of Commerce. He is a Council Member of the Chartered Institute of Stockbrokers.

He has attended various management and professional training in Nigeria, Europe, Asia and America.

Henry Arogundade
The new Executive Director, who was until his appointment, the General Manager (Commercial Banking), brings into his new position 27 years experience in diverse areas of banking.

Henry Arogundade has held many top appointments locally and abroad. He was Managing Director/CEO, ANP International Finance, Dublin, Ireland, (a subsidiary of Afribank), Head, Human capital management, Area Credit Officer, Branch Manager at various branches of the Bank among others. He has also being a part member of the Bank’s EXCO and a Director in AIL Securities Limited.

He has also handled many strategic assignments and headed several committees in the Bank. He was part of the team that drew the five-year strategic direction for the Bank, restructured Commercial Banking and the human capital management for effectiveness and service delivery upgrade. Mr. Arogundade’s steady rise was attributable to hard work and knack to achieve results.

He holds M.Sc (1981) from the University of Ife (now Obafemi Awolowo University), MBA (1987) and B.Sc (1978) both from University of Ibadan and PMD (2001) from Harvard Business School, Boston, USA.

The new Executive Director has attended various courses locally and abroad in Management, banking operations, emerging markets, marketing, business re-engineering among others.

He is a Member of several professional organizations which include: the Institute of Personnel Management, the Nigerian Institute of Management and the Chartered Institute of Bankers of Nigeria.

Godfrey Ebetaleye
Godfrey Ebetaleye is the new Head of Strategy & Planning. He brings to Afribank over 25 years experience in banking, management, tourism and consulting. Before joining Afribank he has worked at Central Bank of Nigeria, United Bank for Africa, Churchgate Group, Port-Harcourt International Hotel, Ernst & Young Nigeria, Ijewere Consulting, GlaxoSmithkline and PricewaterhouseCoopers as Principal Consultant (Associate Director) in the Advisory practice of PricewaterhouseCoopers.

A member of Institute of Chartered Accountants of Nigeria (ICAN), Mr. Ebetaleye holds B.sc Accounting from University of Lagos.

Mike Ogbalu
Mike Ogbalu, a Principal Manager, comes with a background in Electronic/Electrical Engineering. He is a multi-discipline Engineer whose experiences span the fields of Information Technology, Project Management, Electronic Banking and Retail Banking.

Mike spent his early days as a pioneer helpdesk officer at Standard Trust Bank Plc after which he held other positions in IT including Head, Hardware and Networks, Zonal Head of IT in charge of South Bank. He quit banking in 2002 to explore his entrepreneurial ambitions in the area of Telecommunications but returned to banking in 2004 as Head of Electronic Banking at Standard Trust Bank. Mike participated actively in the merger process of UBA and STB as a member of several integration committees. Shortly before leaving UBA, he was the Group Head in charge of UBA’s Remittance and Diaspora business. His team turned around UBA’s remittance business resulting in a consistent year on your growth of about 100%. He has several innovative products designs and implementations to his credit at UBA.

Mike joined Afribank to replicate the feat at UBA as Group Head in charge CID and Funds Transfer.He has also attended several courses both locally and internationally while also facilitating in several local and international seminars on remittance.

Ndidi Adegbite
Ndidi Adegbite, the new head of Training, has worked at Pharez Limited, IBFC Augusto Training Limited, Standard Chartered Bank, First City Monument Bank and Nigeria International Bank in her over 15 years experience before joining Afribank. She has rich experience in performance management, business and product development, management development among others.

She has received trainings on diverse areas of banking and she holds an MBA from the University of Wales, Cardiff.

Yemi Morebise
Yemi Morebise is a Senior Principal Manager and one of the two Deputy Chief Inspectors in the Inspectorate Department of the bank with over 12 years experience.  His responsibilities include planning, coordination and implementation of internal control, system/technology audit and process review. He has held various management positions at First Inland Bank, former IMB International Bank, ECOBANK. He is very versatile in cost control, process re-engineering, investigation and fraud control.

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Risks for the high performing banks

I came across this article in the Guardian UK newspapers today. I must admit that I am impressed by the fact that foreign investment analysts are taking note of the success of these banks. Instead of the usual bad news, at least there are some good things here. They note the risks associated with the stellar performance of these banks. It is a good read. But analysts are humans and it is very difficult to divorce sentiment from facts at times.

Here are some highlights:

1. Nigerian banks were among the strongest performing in the world last year despite the global crisis.
2. Nigeria is growing at its fastest rate in years.
3. Significant growth in loans.
4. Their ability to manage risks may lag their explosive growth.
5. There is still a lot of opportunity as just around 10% of the population have bank accounts.
6. The lack of a credit rating system will affect bank operations as it hinders their ability to rate customers effectively.
7. Increasing reports of high-risk lending.
8. More private equity investments in Nigerian banks…

Stellar Nigerian banking growth brings high risks

Nigerian banks’ ability to manage risk may lag their explosive growth, souring investors’ buy-in on the back of record oil prices, an expanding middle class and corporate lending appetite, analysts say. Nigerian banks were among the strongest performing stocks in the world last year, even as a global credit crisis took its toll elsewhere, attracting interest from private equity and hedge fund investors from Europe, Asia and the United States.

The economy in the world’s eighth biggest oil producer is growing at its fastest rate for decades, global oil prices look set to continue to rally and Nigeria’s government has committed to reforms which will see a growing role for the private sector.

All of this in a country of up to 140 million people, just 15 million of whom are thought to hold bank accounts, meaning huge potential growth in retail banking. "In the last six months the growth in earnings momentum at the banks has just been stratospheric," said Fola Fagbule, a Nigerian research analyst with stockbroker Afrinvest. "We are seeing significant growth in loan books … The average bank I look at has doubled its loan book from the last time it reported an audited account," he told Reuters.

But there are fears that they may be growing too fast.
A wave of consolidation has seen the number of banks in Africa’s most populous nation slashed from 89 to 24 in the past few years, leaving the survivors competing fiercely for millions of consumer clients as well as for large corporate customers."We are concerned that banks may be tempted to expand into retail banking before they are able to adequately manage the risks," JP Morgan analyst Andrew Cuffe said in a report this month, initiating coverage of the Nigerian sector.

MANAGING THE RISK
Most banks have been scaling up, tapping international and local markets to raise more than $10 billion in capital last year alone, enabling them to increase their capacity to lend. Eight banks, including Zenith Bank and Oceanic Bank, have posted 9-month or quarterly earnings increases of more than 100 percent since the start of the year. "We’re beginning to see banks put a lot of their capital at more risk. They have no problem expanding their loan books, the challenge is maintaining the quality," Fagbule said.

Afrinvest estimates that 80 percent of Nigeria’s wealth is in the hands of just 20 percent of the population, meaning a potential market of up to 28 million banking clients. But while many of them may be potential depositors, not all will be rich enough to make them profitable to lend to.
The lack of a national identity system or a fully functioning credit bureau in Nigeria, as well as the banks’ limited experience with consumer finance products such as mortgages, all means extra risk.

"Following extremely strong rates of growth in advances, and with pressure on banks to deploy capital raised over the past year, we believe the risk of a sharp increase in non-performing loans has increased," JP Morgan’s Cuffe said. Even compared to other parts of West Africa, Nigeria feels woefully underbanked. Cash machines are a recent arrival and charges for simple transactions so high that many Nigerians prefer to stash wads of cash under their beds. While some banks are doubling their consumer loan books every quarter, analysts say they are riding with a strong tailwind in Nigeria, a country flush with record oil revenues and expecting economic growth of at least 7 percent this year.

ROLLERCOASTER RIDE
With Nigeria determined to turn itself into one of the world’s leading economies by 2020, involving huge infrastructure projects partly financed by the private sector, analysts agree that the banking industry remains a compelling story.

Russian brokerage Renaissance Capital launched two new financial stock indexes this month to capture growing interest in the sector, while JP Morgan Asset Management identified Nigeria as a leading frontier market for part of its new Africa equity fund, which it hopes could reach $250 million.
But there is less consensus on whether now is the time to buy Nigerian banks after a sharp share price rally last year.

Fears that the banks’ meteoric rise could turn into a bubble have also been heightened by reports that some are engaged in high-risk margin lending, loaning money to other institutions or individuals for stock market trading.Some analysts, such as JP Morgan’s Cuffe, argue their shares have run well ahead of fundamentals and do not take into account the operational and macro-economic risks to the businesses.

Any external shock, such as a drop in world oil prices or serious political instability, could leave them vulnerable. "We believe the sector is expensive on both an absolute basis and relative to emerging market peers … Given a price correction, we would look to enter," Cuffe said.

Others, such as Afrinvest’s Fagbule, point out that last year’s stock market exuberance has waned and that banks are becoming more profitable than ever as they increase lending to the country’s top companies and their employees. "For any bank in Nigeria now that has a handle on risk management, they are going to do phenomenally well," he said. "… As long as those loans don’t go bad."

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Short Summary of Top 15 Nigerian Banks

Here is some information on the top banks in Nigeria as prepared by Reuters:

ACCESS BANK
One of Nigeria’s fasting growing banks, with more than 80 branches around the country. Began operations in 1989. Announced in May it had bought stakes in Banque Privee du Congo, Rwanda’s Bancor Bank and Omnifinance Bank of Ivory Coast.
Posted profit after tax of 8,994 million naira for the nine months to end-December, 2007, up 177 percent on previous year.

AFRIBANK
Commercial and retail bank with more than 250 branches. Began operations in 1960 and was once one of top ten in Nigeria by assets. It is seen as a potential takeover target.
Posted profit after tax of 7,511 million naira for the nine months to Dec. 31, 2007, up 207 percent on previous year.

DIAMOND BANK
Focused on commercial banking since starting operations in 1991, it is seeking to expand its retail business from a current 132 branches in effort to improve margins.
Posted profit after tax of 9,573 million naira for the nine months to Jan. 31, 2008, up 107 percent on previous year.

FCMB
Pioneer investment bank which started operations in 1983 serving corporate clients, it opened its doors to retail customers in 2001. Continues to generate fees as advisor on capital raisings but seeking to expand in retail sector.
Posted profit after tax of 8,995 million naira for the nine months to Jan. 31, 2008, up 153 percent on previous year.

FIDELITY BANK
Started as a merchant bank in 1988, converting to commercial banking just over a decade later and becoming a universal bank in 2001. Plans to expand in oil and gas financing and push ahead with significant retail branch expansion.
Posted profit after tax of 9,344 million naira for the nine months to March 31, 2008, more than triple the previous year.

FIRST BANK
Nigeria’s oldest bank, incorporated in 1894 with a head office in the United Kingdom, it remains the country’s most profitable with more than 400 branches and ATMs. Seen as potential market leader in retail lending.
Posted profit after tax of 25,922 million naira for the nine months to Dec. 31, 2007, up 75 percent on previous year.

GUARANTY TRUST BANK
Focused on retail and corporate banking, it began operations in 1991. Quick to introduce mobile, telephone and internet banking in 2002 it has been aggressively rolling out new branches. Has subsidiaries in Gambia, Sierra Leone and Ghana.
Posted profit after tax of 11,808 million naira for the nine months to Nov. 30, 2007, up 57 percent on previous year.

IBTC CHARTERED BANK
IBTC began operations in investment banking and asset management in 1989 before merging in 2005 with Chartered Bank and Regent Bank, bringing retail and commercial capabilities.
South Africa’s Standard Bank bought control of IBTC last August. The bank has handled some of Nigeria’s largest equity capital raisings. Posted profit after tax of 4,509 million naira for its half-year to Sept. 30, 2007, up 38 percent on previous year.

INTERCONTINENTAL BANK
A pure merchant bank when it began operations in 1989, it has become a major commercial player in the oil and gas, and telecoms sectors. It is also expanding its retail business, aiming for close to 300 branches.
Ranked among the 1,000 largest banks in the world, it is in technical partnership with France’s BNP Paribas in the management of Nigeria’s foreign reserves. Posted profit after tax of 11,317 million naira for its half-year to Aug. 31, 2007, up 73 percent on previous year.

OCEANIC BANK
Focused on retail banking, it began business in 1990 and has expanded rapidly with a broad range of consumer products. Commercial lending primarily to real economy, manufacturing and mining firms, as well as to federal and state governments.
Posted profit after tax of 8,847 million naira for the three months to Dec. 31, 2007, up 153 percent on previous year.

BANK PHB
Formed out of a merger in 2005 between Platinum Bank and Habib Nigeria Bank, it is a commercial bank heavily involved in public sector finance and has been aggressively growing its retail client base.
Posted profit after tax of 14,846 million naira for the nine months to March 31, 2008, up 229 percent on previous year.

SKYE BANK
Created by the merger of five banks in 2006, it is full service bank offering real estate development finance, public sector banking and has been developing corporate banking in the oil and gas, and telecoms sectors.
Posted profit after tax of 7,663 million naira for second quarter to March 31, 2008, more than four times previous year.

UBA
Originally founded in 1961, United Bank for Africa merged with Standard Trust Bank in 2005 and aims to lead growth in consumer finance, develop private/public sector financing and expand across Africa.
Posted profit after tax of 18,420 million naira for its half year to March 31, 2008, up 71 percent on previous year.

UNION BANK
Established in 1917, previously owned by Barclays, it has a broad, loyal customer base but is seen as slow to respond to market changes. Global banks have expressed interest in taking a strategic stake.
Posted profit after tax of 13,500 million naira for its half year to Sept. 30, 2007, up 60 percent on previous year.

ZENITH BANK
Focused on low-cost commercial, public sector and retail deposits and lending to low-risk large corporates, it has built a reputation for high asset quality and is pushing ahead with a rapid roll-out of new branches across the country.
Posted profit after tax of 33,323 million naira for its 9 months to March 31, 2008, up 137 percent on previous year.

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