Nigerian banks’ earnings will be crimped this year as the state-owned company established to buy their bad debts requires lenders to pay more toward its costs, said Zenith Bank Plc (ZENITHBA) Chief Executive Officer Godwin Emefiele.
Industry earnings growth this year probably won’t be “as aggressive as it was in 2012,” because of higher costs, the head of Nigeria’s third-largest lender by market value said in a phone interview from London today.
The Asset Management Corp. of Nigeria, set up in 2010 after a debt crisis threated the collapse of the country’s banking industry, said it spent 5.6 trillion naira ($35.2 billion) in 2011 to acquire non-performing loans. It increased the amount of total assets banks need to contribute to its sinking fund to 0.5 percent this year, from 0.3 percent.
“All the banks will need cover some more money out of their profits,” Emefiele said. “Banks are going to be taking some little hits in the area of costs, so the profitability will not be as high in percentage terms.”
Zenith Bank reported a 52 percent rise in net income to 64.6 billion naira in the third quarter through September, the company said in October. The lender hasn’t reported full-year earnings for 2012.
The lender listed $850 million of non-capital raising global depositary receipts on the London Stock Exchange today. This will allow foreign investors who aren’t allowed to buy stock on the Nigerian bourse to invest in Zenith, said Emefiele. The bank isn’t considering raising any capital now and would wait for lower interest rates to do so, he said.
Eurobond market prices “don’t look competitive” currently and the bank is “adequately capitalized” with a 30 percent capital liquidity ratio, compared with the Central Bank of Nigeria’s 15 percent minimum requirement, Emefiele said.
Access Bank Plc (ACCESS) (ACCESS) sold $350 million of five-year Eurobonds in July last year at 7.25 percent, the third Nigerian lender to do so since 2007.
Zenith Bank shares retreated 0.6 percent to 21.28 naira at 1:06 p.m. in Lagos, the commercial capital. The lender’s stock has climbed 9 percent this year, compared with the 18 percent advance of the Nigerian Stock Exchange All-Share Index (NGSEINDX).
Nigerian benchmark interest rates and cash reserve requirements for banks will probably not be eased by the central bank from record highs “in the near term,” said Emefiele.
The central bank’s Monetary Policy Committee, led by Governor Lamido Sanusi, kept the policy rate at 12 percent for a ninth consecutive meeting on March 19 to bolster the naira and keep inflation under control. The cash reserve requirement ratio for lenders, which has been raised in steps from 4 percent in 2011 to 12 percent last year, was also kept unchanged.
“I’ve looked at it as a sacrifice we have to make to have a stable exchange rate and to build up our foreign reserves,” Emefiele said.
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