Banks
have been asked to stop excessive provisioning for non performing loans
in their books as the Asset Management Corporation will buy the rescued
banks loans and also the margin loans of other banks, say some finance
experts.
“With
the execution of this transaction, (a three year zero coupon
consideration bonds) non performing loans concerns across the banking
sector have got a major relief. This clearly lays to rest the days of
provisioning surprises, as the full participation of the banks in this
process cements the days of troubled past,” says Adesoji Solanke, an
equity research analyst at Renaissance Group, an investment banking
firm.
Mr. Solanke added that the sector is expected to be more focused this year, with its non performing loans taken care of.
“We
welcome revamped lending practices and a more defined business focus in
the sector, and see moderate, sustainable, and higher quality earnings
dotting the sky line in the next few years,” he added.
The
non performing loans acquired from the cleared banks (margin loans)
stands at N167 billion, which represents 8.6 per cent of the total non
performing loans acquired today, while the balance 91.4 per cent or
N1.78 trillion came from the troubled banks.
Banks comparative stock performance
Despite
the challenges faced by the banks and the burden of non performing
loans they had to bear, experts say the sector performed relatively
well at the stock market, except for a few.
“The
Nigeria Stock Exchange All Share Index (NSE ALSI) closed 18.93 per cent
up, effectively bucking a two-year bleeding trend. Nigerian banks
played a huge part in this return to the greens, with 76 per cent of
listed banks posting positive (Year to date) YTD returns compared to
just 13 per cent in 2009,” a report from Renaissance Capital stated.
“Sterling
Bank was the sector’s jewel, posting an 88 per cent year to date climb,
coming on the back of a 49 per cent dip in 2009. Skye Bank followed
with a distant 60 per cent (YTD) rise. On the flip side, Ecobank
Nigeria was the poster boy, as it emerged the worst performing stock
amongst the cleared banks for the second consecutive year – 62 per cent
in 2009 and 66 per cent in 2010,” it further said.
According
to the report, First Bank and UBA, alongside Union Bank and Afribank,
all recorded a second year of year to date losses. Oceanic, Unity, and
Wema banks also did well, with average YTD gains of 43 per cent and
only GTBank, Access Bank, and FCMB posted their second consecutive year
of positive YTD performance.
Ecobank
declined to speak on why the bank emerged the worst performing stock
amongst the cleared banks for the second consecutive year, as the
corporate affairs official said he was not in the position to speak on
investment performance matters on behalf of the bank and that the
person authorised to speak on the issue was not available.
A source at the bank, however, said a number of issues may have caused the poor performance of the stock.
“You
know that dividends are among things that actually push stock
performance in the market. Investors may say that dividends have not
been regular.
“Besides,
once you have a parent company, there is the tendency that investors
would prefer investing in the parent company, ETI, than in Ecobank
itself,” the source said.
