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Finance
experts have noted that the declining earnings of banks are not
reassuring for an industry seeking to regain the confidence of
customers and investors.

They said this over the weekend at the official launch of the 2010 Nigerian Banking sector report in Lagos.

Ike
Chioke, the Managing Director, Afrinvest (West Africa), a finance
investment firm said for the creation of wealth and proffering of
solution to investment challenges, banks have disappointed, especially
in the area of asset creation.

“The
recent industry earning releases are not reassuring. There is a notable
decline in the growth of banks earnings. They did not create new
assets, and lending rates are still high. The signals we are seeing
from earnings are not encouraging. We are urging the banks to re think
and address their strategy as regards the creation of assets” he said.

“What
we are getting now is a write back of provisions made last year,
because hardly any new assets have been created. This is an opportunity
that can probably last for one more year” he said.

The
experts at the forum, comprising of the chief executive officers of
banks like Stanbic IBTC and Spring Bank among others, investors and
advisors from different finance houses, and representatives of the
industry’s regulatory bodies, confirmed that until the real sector of
the economy is revived, the future of the banking industry is not
really clear.

Joe
Alegienu, the representative of the central bank governor, Sanusi
Lamido Sanusi, said the regulatory body is already seeking solutions to
these problems in the real sector.

“The
Central Bank has promised N500 billion to the real sector. N200 billion
is allocated to SME’s and manufacturers and N300 billion to power and
aviation. I can assure you that the disbursement of these funds is
already in progress”.

“Of
the N200 billion allocated to SME’s and manufacturers, N130 billion has
been disbursed to the Bank of Industry. The Bank of Industry has also
disbursed N111 billion has been disbursed to 17 banks for 305 projects
that were applied for. We believe that this would help change the face
of SME’s and manufacturers industry in the country. We have just
concluded the guidelines and we are waiting for bank able projects in
that sector” he said.

“As
regards the N300 billion for the Power sector, we have just concluded
the guidelines that would be used to monitor the disbursement of that
fund and we are also waiting for bankable projects in that sector” he
said.

The fear of lending

Mr.
Chioke said one of the lingering effects of the central bank’s special
audit is that credit to the private sector has practically thinned out
as banks have directed focus on debt recovery. “Meanwhile, they are
defining new approaches to asset creation given now the obvious
requirement to exercise extra caution and due diligence in order to
avoid future losses.”

Afrinvest
West Africa says provisional data from the Central Bank indicates that
year- on – year credit growth slowed to 30 per cent in August 2009
compared to 59 per cent in January 2009 and the highs of over 100 per
cent in 2008.

The
Central Bank has also expressed concern at banks’ reluctance to lend,
especially to the real sector and has noted this at Monetary Policy
Committee (MPC) meetings.

One
of such concerns led to its resolutions of policy committee members
considering modalities for the injection of N500 billion into the real
economy, noting that though economic reforms and human capital
development remain key ingredients for economic growth, the apex bank
would continue to focus on macroeconomic and financial stability
considering its strategic role in achieving sustainable economic growth.

Finance experts are however urging banks to endeavour to create assets
and not rely wholly on writing back provisions made last year. Experts
say the asset management company would help the banks address their non
performing loans and reposition them to create new assets.