Finance experts say the reported 2012 year-end profits in their billions of Naira by banks should not raise credibility concerns as a number of factors combined to put the banks in a better light in 2012.
Most banks in Nigeria have reported rising profit in their 2012 year end books. Some Nigerians have expressed fear about the huge profits citing similar situations before Lamido Sanusi led Central Bank revealed that the banks were not as healthy as they claimed in their reports.
Adesoji Solanke, Banking Analyst, (Sub Saharan Africa) Equity Research, at Renaissance Capital, an investment bank, said no fewer than three major factors could have accounted for the banks reported profits in 2012, when compared to 2011 and prior years.
According to Mr. Solanke, one of the major factors was that interest rate was high and the banks made plenty of money through this.
He also added that post Asset Management Company, AMCON, charges are falling; hence banks are making much more money than they did in previous years. He said tax rate has crashed as it were, as the banks are enjoying tax concessions on corporate bonds and other investments as well as the 10 year tax waiver.
“A combination of these factors goes to show that the banks made much more money last year than previously and these factors are major reasons why the banks have higher Profit After Tax (PAT) in their 2012 year end books than in previous years” he said.
A report by the investment bank highlighted tax as the banks’ saviour.
“It is not very often that the taxman can be described as a friend, but for some of the banks, he was more than benevolent last year. Most of the banks delivered better Year on Year PAT performance versus their PBT results. To some extent all banks were helped by the tax exemption on interest earned on their short-term securities and bonds, but some had additional tax credits. Zenith and Access were the clear winners with the taxman, recording tax rates of 1 per cent and 5 per cent respectively. Diamond and Skye had the highest rates at 20 per cent. 1Q13 tax rates show a more normalised level from 14 per cent-28 per cent,” Renaissance Capital said.
Edo Ayodeji, Analyst at Afrinvest West Africa Limited, a securities firm involved in investment banking and others, said the profits are real.
“Interest rates were high last year and the banks invested in treasury bills, Bonds and securities, which yielded them high income. These investments in fixed income securities helped them make more money,” he said.
According to him, Zenith Bank for instance, invested in investment securities and Federal Government Bonds. Tax was reduced to the barest minimum for the banks as they were asked to pay minimum tax.
He also highlighted that reporting under the International Financial Reporting Standards (IFRS), the banks are not required to pay the 1 per cent on their total assets as they would under the previous GAAP reporting requirement.
“Furthermore we cannot leave out AMCON, while highlighting the reasons for rising profits. AMCON has been doing what it came to do; they came to clean up their balance sheets, to put them in a position where they would be able to make more profits,” he said.
“To cap it all, the banks have been more careful, First Bank, Stanbic IBTC and so on. They have learnt their lessons. They have been cautious. With all these factors, we cannot say these profits are not true” he said.
So far, almost all the Nigerian Banks which released their 2012 year end reports have declared profits, raising credibility concerns to investors and the general public.
| Bank | Profit Before Tax (N m) | Profit After Tax (N m) | |||
| 2012 | 2011 | 2012 | 2011 | ||
| 1 | Access | 44, 880 | 24,107 | 38, 405 | 15,378 |
| 2 | Diamond | 27.5 | (18.0) | 21.9 | (16.9) |
| 3 | FCMB | 16, 2 | (10, 682) | 15. 3 | (9, 243) |
| 4 | Fidelity | 21,625 | 161 | 18.2 | 2.6 |
| 5 | First | 92.7 | 75.9 | ||
| 6 | GTB | 103. 028 | 62, 080 | 86.3 | 47. 517 |
| 7 | Skye | 16,510 | 2,842 | 12,644 | 1,300 |
| 8 | Stanbic IBTC | 11.7 | 10.1 | 10.2 | 6.6 |
| 9 | Zenith | 102,100 | 67,440 | 100,681 | 48,704 |
FCMB reported a profit, recovering from an outright loss in 2011. The bank’s Managing Director, while presenting the bank’s 2012 year end numbers, said the bank is pleased to be returning to profitability.
“We are pleased to have returned to profitability after the challenges of 2011. Doing so, whilst also successfully executing the recent merger, makes the years performance all the more remarkable,” he said.
He added that the trend has continued this year, as the bank reported N4.2bn profit after tax for 2013’s first quarter (up 3 per cent the prior year).
Banks 2013 first quarter reports reveal they are getting over their fragile situations as the banks claim profits are already setting in.
Source: Premium Times
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