Nigerian banks’ offshore operations hardly generate good returns —Report

A recent research by a team of experts at Renaissance Capital Africa has found that majority of Nigerian banks and those of other countries in the Sub-Saharan Africa have not been generating impressive returns, just as they have not had a “smooth ride” in their banking operations outside their home market.

The team comprising Olamipo Ogunsanya; Yvonne Mhango; Phago Rakale; and Ilan Stermer,  described such offshore operations as “relatively recent and fairly tentative.”

In the research result made available to Nigerian Tribune, the experts noted that,”To date, none has made an impressive success of generating returns, though of the Nigerians, United Bank for Africa (UBA) has come closest. In most instances the contributions remain minor and volatile, and returns elusive.”

According to the research, Ecobank Transnational Incorporated has the widest presence, but expectedly, there is going to be a strategic pullback in the long term.

“We believe it should focus first on getting Nigeria right- the biggest single exposure and the most likely to make a difference to the bottom line.

“We remain sceptical of the Nigerian banks attempting to expand into East Africa. In terms of investment stance, we favour the Nigerian banks over the Kenyans on a more positive short-term outlook in their home market. Our top picks are Access Bank and UBA,” the report said.

Most consistent and impressive in the SSA sojourn is the Johannesburg-based Standard Bank and Barclays Africa Group, given their widespread and longstanding operations in the region.

Yet, the research showed that although they have done well, they can still do better in their home market to the greater benefit of shareholders, particularly the Barclays Africa.

“Standard Bank has the bigger SSA portfolio, bigger profit base, and certainly a wider reach across SSA than Barclays Africa, but it is not obvious to us that it has the better or better-balanced operation,” the analysts said.

The researchers noted that they are assessing these SSA banks’ profits, returns and advances in comparison with local and international competitors in a challenging environment.

“We find that progress has been slow, and growth widely dispersed but largely lacklustre. As a result, for most of the banks we think the best advice would have been, and often still is, focus on the home market and getting it right,” they said.

However, they noted that SSA’s economy has turned for the better, assessing it as capable of delivering growth in the next few years, and certainly in the next 12 months.

These growth projections, they said, would be driven in some cases by political developments and renewed economic activity in others.