Coronation Asset Management Limited has listed six banks: Zenith Bank; GT Bank; Access Bank; FBN Holdings; UBA, and Stanbic IBTC as lenders which profitability has improved over the last 10 years.
These banks it noted, have adapted successfully to many changes in interest rates over the10 years from 2010 to 2020. Therefore, they are well-positioned for any rise in rates in 2021.
In its latest and unique 10-year study of the margins and profitability of the banks titled: “ Nigerian Banks, Resilience Built In,” the firm says Nigerian banks’ earnings have been remarkably resilient over the interest rate cycle.
Released on Monday; it noted that the banks’ profitability is improving over time and their stock values are remarkably cheap compared to Ghanaian and Kenyan bank stocks.
The report, written by Ope Ani and Guy Czartoryski of Coronation Research, examine what has happened within the Nigerian Banking industry in the last 10years.
“While underlying growth in assets has been elusive, especially when data are adjusted for inflation, profitability has generally improved,” the report read in part.
The return on average equity (RoAE) and return on average assets (RoAA) of the six banks studied have both converged and improved over 10 years it further added.
This trend appears to be under-appreciated by investors, and the report shows the positive investment potential in the sector” says Guy Czatoryski a Senior Research Analyst at Coronation Research.
According to the report, a banking system can support a high Cash Reserve Requirement (CRR), so long as depositors do not turn up at their banks, all at once, and demand their money, or spend it electronically outside the banking system.
The CRR it stated, relies on the existence of a pool of stable deposits. However, the point is reached where banks become short of liquid funds and encounter problems dealing with their customers’ demands for liquidity.
Such problems were addressed in December 2020 when the CBN issued N5.0 trillion of Special Bills back to the banks, an amount roughly equivalent to their Excess CRR with the CBN.
Coronation Research is a division of Coronation Asset Management which covers full-fledged investment services across various asset classes to the entire spectrum of investors: major institutions, smaller niche institutions & corporates, public sector, cooperatives and high net-worth individuals.
The Firm’s services include fund solutions (money market fund, fixed income fund and balanced fund), portfolio management (discretionary and non-discretionary), advisory services as well as fund administration and trustee services covered through its subsidiary, Coronation Trustees Limited.
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VERDICT: MISLEADING!
and then