FIRST BANK, ZENITH, INTERCONTINENTAL, UBA DOMINATE MARKET SHARE- Afrinvest Report.

After subjecting Nigerian banks to stringent stress-tests, Afrinvest, Africa’s leading investment research firm, has reported four banks as dominant in the Nigerian financial market. The banks according to the report released over the weekend said the four banks control between 40.6 and 45.9 per cent of the industry while the remaining 20 banks control between 54.1 and 59.4 of the market. 

  

The breakdown according to the report shows that in terms of total loans the banks control 40.6% in shareholders’ fund, 45.9% in total assets, 40.6% in total loans and 42.5% in total deposits. According to the Afrinvest ‘‘they also dominated market volume. Measured by gross revenues, our analysis reveals precisely the same alignment, with the same four banks between them accounting for 42.0% of estimated industry revenues.’’ 

  

The report revealed that several banks were content to focus on niche business within specialized markets like trade and import finance, large-ticket structured finance, middle-market wholesale trading, capital markets, and real estate financing. In some instances, the analysts observed that some other banks were limited from achieving any degree of operating scale by internal challenges arising either from legacy merger issues, or missed capital raising opportunities during the boom cycle. 

  

Overall, Afrinvest said, “there were rich pickings to be had both as large scale operator seeking market dominance and as a niche operator focusing on specific client markets. Indeed, we note that significant market volatility in 2008/2009 may have created disadvantages to scale, as larger banks may have been insufficiently nimble to react to a fast changing market environment.” 

  

On risk exposure, Afrinvest report stated that ‘‘patterns across banks differ (depending on specific active markets), we did witness a broad enough scope of change in market direction to ensure that all operators will be faced with some degree of exposure to challenging risk positions over the next 12 months.’’ 

  

In conclusion, Afrinvest Researchers noted that the on-going global financial crisis with its attendant implications for sub-Saharan Africa has helped set-up what will be the first major test for Nigeria’s recently consolidated and recapitalized banking sector.  And  Nigerian banks (fresh off three major cycles of successive capital raising and consolidation) are significantly better poised to weather the storms than they would have been without these industry-defining changes. 

  

Nonetheless, rapid growth and easy access to domestic and international capital markets have fueled an expansionary period in risk asset creation that will now be tested under the most severe of market conditions. 

  

Afrinvest Ltd is a London-based independent investment bank. Its focus is exclusively the African markets and it has become the leading provider of African securities to the European investment community in emerging markets. It was created in 1995 identifying a gap in the emerging markets to provide specialized research and investment advice for London-based institutions interested in the African markets. Afrinvest provides all the execution services for international institutional clients seeking to deal in African securities. 

Intercontinental Bank, UBA, First Bank make Forbes top 2000 World's Biggest Companies

At the backdrop of global economic meltdown three Nigerian banks, Intercontinental Bank Plc, First Bank, United Bank for Africa (UBA) Plc made the Forbes list of top 2000 world biggest companies.

They joined 248 other companies around the world to displace same number of companies that featured on the list in the 2008 ranking. This appears to be a confirmation of the 2009 global banking industry. which listed the three banks among top 500 banks in the world.

The global banking industry research and ratings for 2009 has listed First Bank of Nigeria Plc, Intercontinental Bank Plc, Union Bank of Nigeria Plc, Zenith Bank Plc and United Bank for Africa on the World’s top 500 banking brands by the Banker magazine, a publication of the Financial Times of London.

Nigerian banks made their first showing on the world’s top 500 banks in 2007 when Intercontinental Bank came number 355 on the list while also emerging the fastest growing bank in the world. The bank has since then made the list moving up in 2008 to 334.

The banks that made this year’s list had emerged as industry leaders consistently since after the banking industry reforms introduced by the Central Bank of Nigeria in 2004 and industry watchers believe they are going to sustain this position for a long time as their market share keep growing by the year.

Factors accounting for the drop off of the companies that were on the 2008 list but could not make the list in the 2009 ranking, according to Forbes, include mergers, weak financial performance and outright failure.

For instance, Forbes noted that the former 97 th -largest company in the world, Lehman Brothers, fell into bankruptcy, while the weakness in the financial markets led to governments nationalizing some big banks, such as Ireland’s Anglo Irish banks and Iceland’s kaupthing Bank.

For Nigeria, the listing of three of the country’s banks on the Global 200 current listing is a cause for cheers. First Bank Plc is ranked at 1,375 while the United Bank for Africa comes on the list at number 1,560, Intercontinental Bank Plc completes Nigeria’s showing on the list at 1,798.

Explaining the methodology adopted in arriving at the final compilation of the 2000 biggest companies, Forbes says that companies must have a publicity traded stock in order to qualify for the Global 2000. The Global 2000 companies have the top composite scores based on sales, profit, assets and market value.

First Bank Plc’s composite score on the four metric measures shows a sales figure of $1.29billion, a profit stated at $0.31billion, assets metric calculated at 413.05billion and market value stated at $2.89billion.

The United Bank of Africa’s sales figure is stated at $1.44billion with profit at $0.35 while its assets stand at $14.22billion and its market value calculated at 41.43billion.

Intercontinental Bank Plc incredibly returned a higher sales figure that the other two Nigerian banks on the list with its $1.48billion position and a profit position of $0.29billion with assets calculated at $11.90billion and market value adding up to $0.88billion.

Speaking on the report, Microsoft Chief Executive Steve Ballmer said, “ Even a depression is a place for opportunity if you have cash, scale and ambition. Many of the names on this year's Forbes Global 2000 list of the world's biggest companies will emerge on the other side of the trough far stronger when world economies snap back next year. For the strong corporations, there are rivals to buy, technologies to fund and new markets to enter--all at lower prices than we've seen in years. ''Despite the economy, it's important to think about what is possible.''

Forbes' ranking of the world's biggest companies departs from lopsided lists based on a single metric, like sales. Instead, it uses an equal weighting of sales, profits, assets and market value to rank companies according to size. This year's list reveals the dynamism of global business. The rankings span 62 countries, with the U.S. still dominant at 551 members, but that is 200 fewer than in 2004, when we first published this global list.

For the past few years, we have also identified an important subset of the Global 2000: big companies that also have exceptional growth rates. To qualify as a Global High Performer, a company must stand out from its industry peers in growth, return to investors and future prospects. Most of the 130 Global High Performers have been expanding their earnings at 28% a year or better--easy for a start-up, hard for a blue-chip.

The brains behind the Rumors and De-Marketing in the Banking Industry

I refer you to Vanguard Newspaper lead story of 31 March 2009 and a similar story in the Punch Newspaper of 31 March 2009. It appears that the brains behind the rumors and De-Marketing in the banking industry are gradually being unveiled. Information flowing out is indicating that a particular old generation bank is actually spreading rumors targeting customers of Oceanic Bank, Intercontinental Bank and Zenith Bank. It is also becoming clearer that the purpose is to scare off the depositors of the banks and move their deposits to the old generation bank.

There is also clearer evidence in the Money Market that staff of this particular old generation bank are actually spreading rumors about the targeted banks. The CBN should not shy away from bringing the offenders to book, even publicly since it had stipulated punishment for De-Marketing.

De-marketing campaign taken to high-profile customers

Government ministries, corporate organisations and high-net worth individuals are being targeted in a fresh round of “high-level de-marketing” campaign in the banking sector aimed at gaining greater market share of deposits. This is part of the intensified competition in the banking sector, which is giving the monetary authorities a lot of concern.

Some bankers have claimed that the de-marketing strategy, in which rumours are spread about the supposedly precarious state of some banks, is being orchestrated by some first-generation banks to get customers of others to move their accounts and businesses to them.

The banks are said to be deliberately nurturing the perception of being the only “safe” banks to the detriment of rivals.

About a dozen banks have been mentioned in recent weeks as having some form of distress due to the effects of the global meltdown sent to heavyweight depositors and top ministry officials in text messages and unsolicited e-mails.

But the Central Bank of Nigeria and the Federal Ministry of Finance have insisted that all banks are generally safe and that government will prevent any bank failure.

Some industry sources say that the second generation and mid-tier banks are the main victims of this campaign and a few have seen limited run in the past few weeks with staff of some companies and government organisations moving their salary accounts from these banks.

Some bankers had previously accused stockbrokers that were heavily indebted due to losses from margin trading of spreading the false rumours to generate tension in the banking industry.

The stockbroker have since rejected this claim.

The Central Bank of Nigeria is worried that the spreading of such rumours could further undermine the banking sector confidence, and has reeled out sanctions for such unprofessional conduct including hefty fines.

The apex bank’s concerns are hinged on the uncertainties over the banks exposure to the stock market and petroleum products importers who have suffered losses due to the recent depreciation in the value of the naira.

The level of distrust in the system was responsible for the surge in inter-bank lending rates in recent weeks, to which the CBN has responded by expanding its discount window to provide liquidity for banks that might be short of cash.

Insiders said on Monday that at least 18 banks have so far accessed the CBN’s expanded discount window to meet short-term obligations.

A top banker, who did not want to be named said the conduct of rivals amounted to “risky” behaviour.

He said, “We know that the banks are tied together in one way or the other, if one falls, others will follow, so it is in our best interest to keep banks afloat. Even if one only bank fails, there will be a run on healthy banks because customers will say ‘if it can happen to that bank why can’t it happen to mine.’”

Source

Unwholesome practices in some financial institutions

THESE are not the best of times for some of our aristocrats. Neither are things getting better for some of our banks and other financial institutions. As the global economic crisis continues to shoot without missing, individuals and corporate bodies are learning to fly without perching. They are adopting different survival strategies. But the problem now is that while the kite perches, it does not allow the eagle to perch as well. Bear with me if I tend to be speaking in parables. It’s because of the enormity of the problems we will share together here today.

Aliu Eroje

VIEWPOINT 29 MARCH 2009

Last week, African Petroleum Plc came up with a disturbing allegation. In a two-page advertorial in some national dailies, the management of AP accused Nova Finance and Securities Ltd. and Alhaji Aliko Dangote of unethical manipulation of AP shares. This, the company claimed, had led to a decline in value of its shares. Whatever be the outcome of investigations into the matter by the Nigerian Stock Exchange and the Securities and Exchange Commission, it is imperative to note that this type of negative stories is partly why many Nigerians have lost confidence in the stock market.

In the same token, many are also losing confidence in the banking sector. There are variegated rumours regarding the good health or otherwise of our banks. Part of these rumours is that some banks are a few kilometres away from distress. Before the 2004 consolidation exercise in the industry, such a practice was rife. In 2006, the rumour resurfaced. To stem this tide, the Central Bank of Nigeria, in a circular, warned against this trend. Towards the end of 2008, some disgruntled elements in the industry sent text messages indicating that the five banks selected as market makers to arrest the downturn in the stock market, had liquidity problems.

Now, the problem is back. Industry sources attribute this unwholesome practice mainly to the cut-throat competition among top players in the sector. Each of the top five banks is struggling to be the number one. Those in the league of 10 are fighting to be among the first five. And like jilted lovers, they run each other down in what is known as de-marketing.

There is also the Soludo angle to the whole issue. The first term of the CBN Governor expires in May this year. Hence, there are some interest groups angling to take over his position. And the best way to do this, perhaps, is to rubbish his major legacy – the banking consolidation. There are other reasons hinging mainly on the desperation of the banks to stay ahead of competition.

Both the CBN and the Chartered Institute of Bankers of Nigeria had intervened in the past to stop the trend. The CBN Governor, Chukwuma Soludo, has had cause to reassure citizens that our banks are still very strong. He had warned that de-marketing or whatever name they call it would do nothing but undermine the banking system.

Beyond de-marketing, there are some other financial malpractices the CBN needs to look into. One of them is the allegation that most banks indulge in foreign exchange fraud (see our cover story today). Reports at my disposal indicate that these banks use fake international passports to obtain Basic Travelling Allowance, which is usually in dollars. They sell these dollars in the black market in order to make undue profits. This, perhaps, explains why dollar is expensive now. And this is partly why the prices of imported items have risen to the rooftop.

Our major problem is greed; or dishonesty if you like. Elsewhere, billionaires pool resources together to better the lots of humanity. In June 2006, for instance, American billionaire investor, Warren Buffett, announced a donation of almost all his assets to charity. The greatest beneficiary happens to be the Bill and Melinda Gates Foundation. Incidentally, the chairman of the Foundation, Bill Gates, is richer than Buffett who made the donation. Here, our own billionaires fight to discredit one another.

Click for more 

Nigerian Banks Operating in Challenging Climate

The climate in which Nigerian banks are operating must be really challenging.  Imaging the other day, it was widely rumoured that Nigerian banks are distressed. One begins to wonder the fate of depositors of the banks that would be affected.

Just as I was contemplating the next line of action, I got this report that one of the banks precisely Intercontinental Bank would be opening 25 new branches next month and with additional 45 branches on stream, the bank equally is rolling out drums to celebrate its 20^th year anniversary.

These activities negate all known distress signals, my contemplation is settled, I think I can rest, Intercontinental Bank surely must be solid.

The Central Bank of Nigeria may be correct then with their statement about Intercontinental Bank and the Banking Industry in general. 

• "Intercontinental Bank Plc remains healthy and has been meeting her obligations to her customers; 
• the bank has been participating actively at the foreign exchange Retail Dutch Auction (RDAS), where it bids regularly on behalf of her customers who require foreign exchange for their transactions; and  
• the Central Bank of Nigeria has not received any adverse report from her correspondent and/or other foreign banks of any default or unprofessional conducts."
• Nigerian Banks are safe and strong.

ISSUES IN DE-MARKETING IN THE NIGERIA BANKING INDUSTRY

 

• Banks contest for top position i.e. No1 bank in Nigeria, the most capitalised bank, the first in this and that. All these resulted in cut throat competition to be in league of No1 bank or the top tier. The industry has been stratified into top 5 banks, top 10 banks and others. 

• Battle for top 5 appears to be hottest where you have the likes of Firstbank Union bank, United Bank for Africa, Intercontinental Bank, Zenith, Oceanic bank and GTBank have been in this rat race since after consolidation. This has been the breeding ground of high profile de-marketing. 

• The top 10 banks were up coming and fast driving banks, playing in another hot platform for de-marketing. Those in this category includes BankPHB, Diamond Bank, Access, Afribank, Fidelity, FCMB, Ecobank and a few others. This group posses two driving spirits (I.)Pull down any of the seven earlier mentioned and displaced them in the big boys category. (ii.) to distinguish themselves as having arrived and create impression that they are equally big and a force to reckon with or at least on a class of its own different from the others in category 3. 

• The scenarios is the battle for key accounts, where the market size has become for blue chip borrowers and large cash cow accounts have narrowed considerably to few public sector entities and government with equally fewer private or corporate accounts. Clash of banks jostling to take positions breed fierce acrimony, a veritable ground to breed de-marketing. 

• There is also the suspicion that old generation banks are not comfortable with the speed of rise of some new generation banks and with the threat of dethroning them from their traditional positions they have to be checkmated. 

• Finally, and what precipitated the latest de-marketing could be connected with year-end antics of banks, the behaviour of banks in the time past has always been to help one another in the interbank deposit market, with a view to boosting their deposit figures for balance sheet reporting. Thus bank A would agree with another set of banks to take internal deposits to beef up, its books such that after bank A’s year-end, the bank would take position to give corresponding treatment to the others during their own year end. Thus the banks have staggered there year end, between February and December (Its Only January that does not have a bank’s financial year –end). This unholy alliance had made CBN to roll out plans for a uniform year end mid last year, but this was vehemently frustrated by some banks, forcing CBN to abandon the plan. 

• However, with the need to sanitise, strengthen and straighten out things in the banking industry CBN and the Bankers Committee had to agree to a uniform year-end early in March 2009, to be effective Dec2009, this development formally broke the unholy alliance forcing every bank to be on its own for the purpose of year end..

• Again the banks are back to the trenches employing all forms of tactics to meet there year-end target. This circumstance was worsened because most of the banks have their year-end between March and July; almost over 70% of the banks belong to this category, making the competition stiffer. Thus de-marketing option appears inevitable, especially for some that are desperate to retain their status.

DIARY OF DE-MARKETING BANKS

1. De-marketing was popular during the days of fledging banking industry, over-crowded with 91players most of which were weak. It was then assuming that it was due to their fragile capital base which was then between N500million and N1billion depending on whether it was commercial or merchant bank.

 

2. Banking consolidation of 2004 brought strength to the industry with minimum capital base of N25billion. Today, each of the top six banks First Bank, Union Bank, UBA, Intercontinental, Zenith and Oceanic  bank has over N200billion has capital base. There asset base are also that large at over N1trillion each.

 

3.   With this size and strength one would have expected the industry to be more matured and disciplined. However, De-marketing re-surfaced in 2006

4.   To check the trend, the CBN had issued a circular in 2006, against the spreading of false rumours among the operators.

5.   According to the circular reference BSD/08/2006, the CBN warned against what it called, “the unethical and unprofessional practice of de-marketing colleagues/other banks in the industry by spreading rumours.”

6. In 2008, another round of de-marketing began towards the fourth quarter. This time around the targets were mainly amongst the top 10 banks.

 

7. Again CBN intervened, summoning the banks CEOs admonishing them while securing their commitment not to resort to unethical practices in competition.

 

8. Also, The Chartered Institute of Bankers of Nigeria (CIBN) mobilised the bank CEOs to address the issue, and sanctions were spelt out for offenders for the first time against any bank or bank staff engaged in de-marketing.

 

9. Sanctions ranged from, N10million fine to outright dismissal of stall and the blacklisting of offending banks.

 

10. Again this did not deter the banks as the faceless, perpetrations resurfaced early this year with much more vicious strategy.

CBN REACTS TO DE-MARKETING

 The CBN has denied the allegations that the banks are the verge of collapse as a result of the global financial crisis all over the world Prof. Chukwuma Soludo gave the assurance that banks are strong enough to withstand the economic downturn; he however added that CBN has adopted some measures to ensure that the banks remain virile.

Soludo said, "the banks remain the key pillar of hope for this economy especially at this time of global financial crisis, and it is our collective job to keep the banks alive, all the rumours, text messages, unfounded insinuations all forms of de-marketing, undermines the stability of the system. I understand that some people even within the banks in other to get businesses are also trying to de-market other banks by saying ‘oh this bank, oh that bank’. I am telling the public to clearly ignore any such, when you hear any bank staff telling you about another bank, please report such a person if you can to the CBN and we will be able to deal with such a staff of any bank decisively, the only reason why they do that is just to take business’’.

‘‘That is the reason, the reason why the staff of another bank would be telling you "oh that bank has exposure to the capital market, and so what? The banks have been lending in the past and some of the loans may have not been performing in the past and the banks make provision for them even when they didn’t have much capital. The good news this time around is that they have got the capital that could easily absorb such provisioning if they need to make it’’.