Cordros Capital/Sept; 08 2014

The Nigerian banking sector had a tough year in 2013 as a raft of regulatory changes (ATM fee cancellation, public sector CRR hike, reduction in CoT to N3/mille, increase in AMCON charge to 0.5%) negatively hit their operational capabilities. The regulatory flux and banking sector challenges continued into 2014 as the CBN, under Mr. Sanusi, in its January MPC meeting raised the CRR on public sector funds from 50% to 75% in a bid to combat systemic liquidity which was feared will depreciate the Naira. The March MPC meeting, headed by the acting Governor, Mrs. Sarah Alade, saw the apex bank go further, as it raised the private sector CRR from 12% to 15% again in a bid to maintain Naira stability. CoT also has fallen to N2/mille in 2014 and is set to be scrapped by 2016.

The regulatory and monetary policy shifts have persisted following the ousting of Mr. Sanusi as the new CBN Governor, Mr. Emefiele has begun stamping his mark on the apex bank. In terms of banking regulation, the N100 ATM withdrawal charge (for non-customers of banks) which was scrapped in November 2012 has now been reinstated but at a lower rate of N65. The CBN has also revised the computation of regulatory capital by omitting regulatory risk reserve for the purpose of capital adequacy assessment, deleting collective impairment on loans and receivable and other financial assets in the calculation of tier-2 capital, and limited total tier-2 capital (including OCI reserves) to 33.33% of total tier-1 capital.

Against this backdrop we now analyse the financial performance of the tier-1 banks as at the first half of the year and give our opinion on which bank had the best performance during this period.