reports
- Nkemdilim Nwadialor
FBN Holdings: Q2 20 results: Improved funding costs and fee income cus...
FBNH recently released its Q2 results, posting a 3% yoy increase in net attributable profit on its restated Q2 19 results. Net interest income was flat yoy as the lower gross interest income outweighed a 15% decrease in interest expense. Non-interest income, on the other hand, was up 15% yoy despite a NGN6.2bn loss in foreign currency, owing to a 25% increase in fee income on account of higher e-banking transaction volumes. Overall, FBNH's Q2 results were a mixed bag as pre-provision profit w...
- Gbemisola Ogungbade
- Nkemdilim Nwadialor
CAL Bank: Poor Q2 on lower fee income and higher cost of risk, but rei...
We reiterate our Buy recommendation on CAL Bank but lower our target price to GHS1.00 (from GHS1.30), on account of a 50% decrease in our earnings forecast for FY 20f. This decrease is driven by three major policy moves from the Bank of Ghana (BoG). First, the BoG cut the policy rate by 150bps (which should translate into lower yields on interest assets), next it removed fee charges on transactions below GHS100 and, finally, it suspended the payment of dividends by all banks for 2020 and 2021...
- Nkemdilim Nwadialor
Nigeria Banks: Battling pandemic, loan book restructuring and regulato...
We update our models and estimates to reflect the challenging macroeconomic backdrop from lower oil prices, the Covid 19 outbreak, the recent currency devaluations and the changing regulatory backdrop. Our ratings are unchanged, earnings forecasts are lower and TPs are higher owing to the lower rate environment. Lower earnings estimates: We forecast a 5% CAGR for earnings in FY 20f-23f for our Nigeria bank coverage, with an average ROE of 13.3%. We have cut our forecasts to reflect Nigeria’s ....
- Nkemdilim Nwadialor
Nigeria Banks: Lower NPL ratios on the horizon as CBN allows inter-ban...
The Central Bank of Nigeria (CBN) yesterday introduced a new set of guidelines that allows banks to debit loan defaulters of their funds held in other bank accounts across the country. We think this is a positive for banks and could help to improve their NPL profiles. The newly introduced Global Standing Instruction (GSI), which takes effect from 1 August 2020, will serve as a last resort for a creditor bank, without recourse to the borrower, to recover past-due obligations (principal and acc...
- Nkemdilim Nwadialor
- Patrick Curran
Nigeria: Muddle through is the new normal
The Covid crisis and collapse in oil prices (c85% of Nigeria’s exports, c50% of revenue and c8% of GDP) has hit Nigeria hard, with real GDP growth expected to drop from 2.3% in 2019 to -3.4% in 2020. However, low growth is not new to Nigeria, averaging an anaemic 1.2% annually over the past five years and only once surpassing the population growth rate of 2.6%. While the government has paid lip service to diversifying the economy away from oil and gas, there has been little to show for their ....
- Nkemdilim Nwadialor
Nigeria banks hit by another central bank debit; we see a pattern!
The Central Bank of Nigeria (CBN) is at it again. It has debited 26 banks a total of NGN216.1bn, attributed to the CRR (Cash Reserve Ratio) compliance requirement. Recall that two weeks ago, the CBN debited banks cNGN459.7bn for the same purpose. This is the third CBN debit in 2020, bring the total CBN debits for the year to NGN2.08tn: 1) CRR and LDR infringements in April 2020 of NGN1.4tn; 2) another CRR debit of NGN460bn; and now 3) the most recent CRR debits of NGN216bn. CBN PENALTIES FOR ...
- Nkemdilim Nwadialor
FBNH divests insurance business, eyes opportunities in bancassurance â...
First Bank of Nigeria Holdings (FBNH) has announced the completion of its divestment from FBN Insurance. According to a the recently filled company disclosure on the Nigerian stock exchange, FBNH's 65% stake in FBN Insurance was sold to Sanlam, who previously had a 35% stake, effectively giving Sanlam 100% ownership of the business. The divestment, which was effectively concluded on 1 June 2020, was first hinted at in April this year when it was announced that FBNH was in talks with Sanlam an...
- Nkemdilim Nwadialor
Nigeria: Central bank move to debit banks jeopardises economic recover...
The Central Bank of Nigeria (CBN) has debited a total of NGN459.7bn from twenty-six banks, to make up for what it says is a CRR (Cash Reserve Ratio) shortfall. This measure comes less than two months after the central bank took NGN1.4tn from banks for falling short of the CRR and LDR ratios. It should be noted that last week the CBN refunded part of this money in a bid to maintain liquidity in the market. This is the third time in nine months that the CBN has taken debits from the banks: 1)Lo...
- Nkemdilim Nwadialor
Access Bank positions to become Africa's biggest lender; looks to East...
Access Bank has injected an additional US$9mn in capital into its Rwandan subsidiary, increasing its investment in the bank to US$13.3mn from US$4.1 mn, and increasing its ownership stake to 75%, further solidifying its position as a regional banking giant. According to the bank’s FY 19 report, Access Bank (Rwanda) posted a 56% drop in net profit to US$646,000 from US$1.5mn in FY 18. The FY 20 results appear to be building up to outperform 2019 as Q1 20 profits came in at US$440,000 (albeit s....
- Nkemdilim Nwadialor
Crowdfunding in Nigeria: Proposed SEC regulations largely positive
Raising capital through crowdfunding has become increasingly popular for start-ups in recent years in Nigeria, but the legality of crowdfunding platforms has been a topic of much debate. The Securities and Exchange Commission (SEC), in a bid to protect investors in such platforms, recently released a draft set of rules to regulate the industry and deepen the domestic crowdfunding capital market. The local crowdfunding landscape Nigeria crowdfunding is dominated by agricultural businesses and ...
- Gbemisola Ogungbade
- Nkemdilim Nwadialor
Ghana: Digital payments pick up; central bank confident this is a "new...
At the May Monetary Policy Committee (MPC) meeting in Accra, the Governor of the BoG, Dr Ernest Addison, noted that the 3-week lockdown, which resulted in the absence of physical banking and physical payment systems in the country (as cash transactions are a possible conduit for the spread of COVID-19) resulted in an increase in the volume of digital payments in the first quarter of the year. Digital payments that are captured by the Ghana Interbank Payment and Settlement Systems (GhIPSS) saw...
- Nkemdilim Nwadialor
- Stuart Culverhouse
Nigeria unexpectedly cuts rate; decision unlikely to move yields in th...
The Central Bank of Nigeria (CBN) unexpectedly cut its benchmark lending rate on Thursday to 12.5% from 13.5%, to stimulate growth following the downturn brought on by the coronavirus pandemic and sharp falls in crude oil prices. This rate cut takes Nigeria closer to negative real rates, as inflation rate stands at 12.34% vs the MPR at 12.5%. The CBN, however, retained its Cash Reserve Ratio (CRR) at 27.5% and Liquidity Ratio at 30%. The MPC decision came as a surprise as the central bank has...
- Nkemdilim Nwadialor
Ghana's inflation rises above target band – on higher food prices
Ghana’s inflation rate rose to 10.6% in April, 2.8 ppts higher than in March. This is the highest rate since the consumer price index (CPI) was rebased in August 2019. [-eu-west-1.amazonaws.com/exotix-content-uploads/26fnVLgksUrQCqrQxlIvm8KZEwcpGVVzzxWwdVuY.png] Ghana – a producer of gold (50% of exports), oil (20% of exports) and cocoa (15% of exports) –has recorded over 5,000 confirmed coronavirus cases, the highest number in West Africa, surpassing Nigeria's 4,971 on 13 May. Give...
- Nkemdilim Nwadialor
FCMB Group: Q1 20 management call – Plans to restructure 50% of loan...
FCMB was the only bank within our coverage to host an investor call following the release of slightly weak Q1 20 results. We summarise below some of thekey points.We have a Hold recommendation on FCMB, with a TP of NGN1.90, and implied ETR of 15%. Restructuring its loan book: FCMB plans to restructure 50% of its loan book (21% from oil and gas, 18% from retail, SME and consumer, 6% from the power sector and 5% others) as failing oil prices and the Covid-19 outbreak deal a serious blow to the ...
- Hasnain Malik
- Nkemdilim Nwadialor
Ghana after the lockdown
On 20 April, Ghana became the first African country to ease lockdown measures (after being in place for three weeks since March) in its two biggest cities, Accra and Kumasi. Schools remain closed and the ban on large gatherings is still in place.President Nana Akufo-Addo said the decision to lift the lockdownwas necessitated by the severe impact of the coronavirus outbreak on the poor and vulnerable. Figure 1: Countries with the highest coronavirus cases in Africa (as at 5 May 2020) [
- Nkemdilim Nwadialor
Stanchart Ghana: Q1 20 – Strong top line growth as funding cost mode...
SCB reported Q1 19 PAT of GHS109mn (up 25% yoy)supported by a 25% uptick in net interest revenue, 84% increase in fee income and improved impairment write backs. Net interest margin was also up by 0.3ppts owing to lower funding costs. Compared with Q4 19, PAT was up 35% while NIM contracted by 5ppts. We reiterate our Hold recommendation on SCB with a TP of GHS15.7 (-12% ETR).Our recommendation is on account of: 1) its relatively high valuation relative to peers, with FY 20f P/B of 2.2x, imply...
- Hasnain Malik
- Nkemdilim Nwadialor
Nigeria eases lockdown to encourage economic recovery
President Buhari has called for a phased easing of the two-month lockdown in Lagos, Ogun and the FCT, which began on 31 March 2020. The restriction on movement within the three states is to be lifted for 14 days from today (4 May 2020), within the hours of 6am and 8pm daily. Schools and religious buildings will remain closed within this period and new standards of sanitation are to be imposed on public transport such as compulsory masks and hand-washing facilities. Nigeria, with a total of 2,...
- Nkemdilim Nwadialor
- Rahul Shah
- Rohit Kumar
Africa's fintech hubs: The search for tomorrow's Silicon Valley
The four main fintech hubs in Africa are Egypt, Kenya, Nigeria and South Africa. These markets have distinguished themselves from the rest of Africa through their support for innovation (for example, via regulatory sandboxes) and the widespread establishment of strategic partnerships (such as Nigerian fintech, Paga's partnership with WorldRemit for international remittances). As a result, these centres have to date attracted the lion’s share of the investment capital deployed across the conti....
- Nkemdilim Nwadialor
- Stuart Culverhouse
IMF approves emergency financing to Nigeria, calls for exchange rate f...
The board of the International Monetary Fund (IMF) has approved Nigeria’s request for the sum of US$3.4bn (100% of quota) for emergency financial assistance as it faces an immediate balance of payments need following the outbreak of the Covid-19 pandemic, which combined with Nigeria’s already high downside risks increased the urgency of the disbursement to Nigeria. There is no policy conditionality attached to the disbursement. Nigeria, like a lot of frontier oil-exporting markets, faces the...
- Nkemdilim Nwadialor
FCMB Group: Q1 20 – Core revenues supported by strong asset growth a...
FCMB reported net profit of NGN4.7bn (up 31% yoy) in Q1 20attributable to higher net interest income (up 24% yoy), which offset lower trading income, higher operating expenses (up 14% yoy), and higher impairment charge (up 99% yoy). We reiterate our Hold recommendation with a TP of NGN1.90 (ETR 15%).FCMB trades at a 2020f PB of 0.2x below its Nigerians peers at 0.4x and our frontier universe average at 0.8x. Due to FCMB’s weak operating efficiency and capital adequacy ratios within a 2ppts ba....
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