Nigerian Banks’ asset growth and earnings will fall in the next 18 months due to the moves by the apex Central Bank of Nigeria (CBN) to protect the economy and banking customers, according to the latest report from the international rating agency Fitch Ratings Ltd.
The private BusinessDay newspaper Thursday quoted the report as saying the prediction was predicated on the tight monetary policy introduced by the apex bank in recent times.
“All these moves led to weaker profitability and stemmed credit growth in the first half of 2014. This is likely to continue into 2015,” Fitch was quoted as saying.
PANA recalled that the CBN has increased Cash Reserve Requirements (CRR) on public sector deposits to 75% from 12%, saying the move was aimed at curbing inflation and limiting how much banks can charge account holders when they withdraw money.
Also, the Asset Management Corporation of Nigeria (AMCON), a state company created to buy bad debts from lenders after the country’s 2009 financial crisis, raised its annual levy on banks to 0.5% of their assets, from 0.3%.
Nigerian banks’ ability to create risk assets is also being squeezed by CBN regulations on capital requirements.
The report, however, observed that despite the monetary headwinds, the banks are currently performing well, with the agency rating nine of them on the international scale, with six of them having Long-Term issuer default rating (IDRs) driven by potential state support.
The banks are First Bank of Nigeria, United Bank for Africa, Diamond Bank, Union Bank, Fidelity Bank and First City Monument Bank.
The report also observed the willingness of the regulatory authorities to support domestic banks, which has continued to be on the increase.
Three banks – Zenith Bank, Guaranty Trust Bank and Access Bank – have IDRs driven by their intrinsic strengths as defined by the Viability Rating (VR).
All Nigerian banks have VRs in the ‘b’ range, mainly due to the high influence of the operating environment on their ratings.