Wednesday, 13 November 2013

"Eight Nigerian Banks Are Too-Big-To- Fail!"

First Bank of Nigeria Limited, Guaranty
Trust Bank Plc (GTBank), Zenith Bank Plc,
United Bank for Africa Plc (UBA), Access
Bank Plc, Skye Bank Plc, Ecobank Nigeria
and Diamond Bank Plc have been
designated by the Central Bank of Nigeria
(CBN), as “too big to fail”, owing to the fact
that their failure could pose a systemic risk
to the banking industry and the larger
economy.
The eight banks alone account for 75 per
cent of the banking sector in terms of
earnings, profitability assets, customer
deposits and branch networks.
The CBN, it was learnt, has therefore
adopted a more robust regulatory regime
to monitor and scrutinise the eight banks,
in order to ensure that they are healthy.
The central bank has also asked the eight
banks to increase their capital base in
order to give them a buffer against internal
and exogenous shocks.
Confirming this development, Deputy
Governor (Operations), CBN, Mr. Tunde
Lemo, described the financial institutions as
systemically important because of their size.
Lemo pointed out that any bank that
accounts for five per cent of the banking
system is systemically important.
“What that means is that we have to take a
closer look at them. It doesn’t mean that
they are weak, it is just that we have to
focus more attention on them because, God
forbid, if something happens to any of
them, it may affect the entire system,” Lemo
said.
Asked about the capital base that the
respective banks are expected to have, the
CBN deputy governor said: “It is not that
they were asked to raise their capital base,
it is just that when an institution is
designated as systemically important, it is
required to have more capital.”
For Zenith Bank, its recently released
results for nine months ending September
30, 2013 showed that its profit after tax
stood at N64 billion with loans and
advances of N1.1 trillion. The bank also
reported gross earnings of N255 billion at
the end of September 2013, up by 11 per
cent from the N229 billion recorded in the
corresponding period in 2012.
Zenith Bank’s total market capitalisation on
the Nigerian Stock Exchange (NSE) stood at
N675.024 billion yesterday.
Also, GTBank’s profit after tax stood at
N69.24 billion at the end of September
2013, as against N63.734 billion earned in
the same period in 2012. GTBank’s total
assets also stood at N1.875 trillion,
compared to the N1.73 trillion as at
December 2012. Its share price on the NSE
closed at N25.99 per share yesterday,
giving it a market capitalisation of N764.916
billion.
In the same vein, UBA’s unaudited results
for the nine months ending September 30,
2013 also revealed that its profit after tax
climbed to N37.37 billion. With a market
capitalisation of N257.255 billion on the
NSE, its share price closed at N7.80 per
share.
For Access Bank, its recently released
unaudited nine-month results showed
gross earnings of N154 billion at the end of
September 2013. Its profit before tax also
stood at N35 billion. Access Bank’s market
capitalisation on the NSE was N213.269
billion yesterday, while its shares closed at
N9.32 per share.
Skye Bank Plc’s gross earnings rose to
N102 billion at the end of September 2013,
while its profit after tax stood at N11.650
billion.
Diamond Bank also posted a profit before
tax of N25.6 billion, while its total assets
stood at N1.377 trillion at the end of
September 2013.
First Bank of Nigeria Limited is yet to
release its third quarter results because of
its holding company structure. [Thisday]

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