A few more banks have released their 2010 year end results, some of which have fallen below the expectation of industry watchers. However, the trend that was common among the institutions was the drop in earnings, due largely to the reduction in lending. Through a mixture of cost-cutting strategies and efficiency in deploying assets, most of the firms still posted impressive profits.
Diamond Bank posted a profit-before-tax of N4.227 billion from a loss of N12.4 billion in 2009, while profit after tax rose to N1.33 billion from a loss of N8.17 billion in 2009.
However, gross earnings were down 16 percent to N91 billion for the 12 months period ended 31 December, 2010 (from N108 billion, 12 month period ended 31 December 2009). Net interest income was also down 16 percent to N49.0 billion (from N42.2 billion in 2009).
The bank’s total assets down 9 percent to N594.8billion (from N650.4 billion in 2009), total loans to customers down 5 percent toN312.2 billion (from N329.8 billion in 2009), while customer deposits were down by 15 percent N412.0 billion (from N482.0 billion in 2009).
‘Nightmarish’ performance
Some finance experts have however, expressed disappointment at the bank’s figures, saying it is “much worse than expected.”
“This result pales substantially when stacked against our forecasts. Although gross earnings were 7.7 percent ahead of our forecast of N84.5 billion, both Profit Before Tax (PBT) and Profit After Tax (PAT) overwhelmingly under performed our forecasts of N10.2 billion and N7.1 billion by 53.3 percent and 81.2 percent respectively. We are constrained to call this a really poor bottom line performance. The bank, expectably, did not propose any corporate actions in the wake of what is a nightmarish performance,” Afrinvest, a finance firm, said.
Industry watchers say the bank might have had to take a substantially larger impairment in the form of provision for bad loans, given the really poor margins on display as they do not expect such a ‘massive’ deterioration in operating margins.
The bank’s officials declined to speak on the figures when contacted by our reporter, saying its reaction would be based on a statement it issued on Tuesday.
In the statement, Uzoma Dozie, ED Corporate Banking, Diamond Bank, said: “In compliance with our enhanced risk management policies, the Corporate Banking unit continued to unwind positions carried over from the economic slowdown in 2009. This has enhanced liquidity and reduced NPLs. Provisions are starting to come back to normal levels as the economy returns to its pre-2008 growth path. This bodes well for the unit as we take up new opportunities arising from telecoms and government infrastructure spending in 2011.”
Robust credit growth
In a similar industry move, First City Monument Bank said its pre-tax profit rose to N9.02 billion in 2010 from N856.6 million the previous year, and declared a N0.35 dividend per share while gross earnings rose to N62.67 billion from 35.79 billion naira in 2009, according to a Reuters report.
“In our view, a good set of results from FCMB, with the tax benefit being the single reason for our earnings estimate miss. The 2010 NIM (net interest margin) squeeze (which is the difference between interest income and interest expense as a percentage of assets reflects broader sector trends, while robust credit growth and cost control are encouraging, we think. It is also good to see asset quality stabilising” Renaissance Capital, an investment bank, said.
Ecobank Transnational Inc. (ETI) the parent company of the pan-African banking group also made its report for the year ended 31st December 2010 public last week.
The bank’s report showed a 4.6 percent decline in gross earnings to $1.1bn from the $1.2bn recorded in 2009. Profit before tax (PBT) surged by 67.3 percent to $169.0m from $101.1m, while profit after tax (PAT) more than doubled to $131.8m, 104.1 percent higher than the $64.6m posted in 2009.
“Gross Earnings fell 9.7 percent short of our projected $1.3bn, while both PBT and PAT fell short of our forecasts of $170.6m and $131.9m by 0.9 percent and 0.1 percent respectively. This impressive performance is in line with expectations, as we anticipated a substantial reduction in its cost of risk due to the debt clean-up activities of AMCON on its Nigerian subsidiary that accounted for as much as 70.0 percent ($98.0m) of the 24.0 percent increase to $140.0m in group provisions.” Afrinvest said.
Stanbic IBTC’s gross earnings in its 2010 year end report declined by 5.1 percent (from N59.8 billion to N56.7 billion), while PBT and PAT grew by 30.8 percent (from N10.3 billion to N13.5 billion) and 16.2 percent (from N8.1billion to N9.5 billion) respectively, when measured against the corresponding period in 2009.
On this, Afrinvest stated that the bank’s gross earnings decline could be attributed to its aggressive growth play on the Nigerian market that may have seen it give up some yield on interest bearing assets.
