AT this period when Deposit Money Banks are expected to start churning out their financial performance for the year ended December 2015, more lenders are giving shareholders nothing to cheer about.
Their profit warnings are full of gloomy pictures due to loan write offs from the oil and gas sector.
Diamond Bank Plc in its profit guidance released on Friday joined First City Monument Bank and First Bank of Nigeria Holdings to inform shareholders in advance that following the worsening macro-economic conditions in Nigeria together with its overall impact on the Banking Sector, “earnings will be lower than in 2014.”
The bank noted that preliminary indications from its statement of financial performance for year ended December 31, 2015 are that earnings will be lower than in 2014. This is on the back of higher than expected impairment charges on loans made to the Energy and Commercial Business sectors.
Detailed financial statements for the year ended December 31, 2015 are expected to be released on or before March 31, 2016 according to the statement signed by Ifeatu O. Onwuasoanya, Head, Investor Relations, Diamond Bank.
Diamond Bank reiterated that in recent years it had deployed considerable resources in building a dependable risk management framework, and that the quality of its loan portfolio in general, remains high.
It noted that further investment had been made to improve customer relationships and revenue in its core business segments.
These actions aim to deliver improved earnings and lower operating costs from 2016 onward.
“Overall, despite the headwinds and the fact that 2016 presents a tough operating environment for the industry, we remain optimistic on the fundamentals underpinning our long term retail-led business strategy.
Just last month, Nigeria’s oldest and leading banking group, First Bank of Nigeria Holdings, issued a profit warning to stakeholders, saying earnings “will be materially below that of the prior year”.
In a statement sent to the Nigerian Stock Exchange, the company secretary, Tijjani Borodo, said the warning became necessary after the review of the management accounts for 2015.
Borodo said the reduction in earnings “is a result of the recognition of impairment charges on some specific accounts resulting from a reassessment of the loan portfolio within our commercial banking business.
“This reassessment was driven by the challenging macroeconomic environment, coupled with fiscal and monetary headwinds which have resulted in marked reduction in domestic output.”
He said further, “This is a prudent measure being taken while the bank has commenced active remedial action on the specific impaired accounts.”
FBN Holdings Plc, in 2014, made a profit after tax (PAT) of N82.8 billion, as against N70.6 billion in 2013
Its gross earnings grew to N480.6 billion, from N396.2 billion in 2013.
By this, FBN Holdings became the second Nigerian financial institution to give a profit warning this year. The first was FCMB Group, which issued a warning in January, saying that earnings in quarter three (Q3) and Q4 will be materially lower than projected.
Similarly FBN Holding stock traded at about N3.47 on the Lagos bourse, declining by 4.41 per cent as news of the profit warning sank home.
First City Monument Bank and its former subsidiaries, forewarned investors in January that it would report lower earnings for 2015 financial year. The profit warning compounded the downtrend at the Nigerian stock market, sending FCMB’s share price down by 8.47 per cent to N1.08 per share.
In a profit warning made available at the Nigerian Stock Exchange (NSE), FCMB said its earnings in third quarter 2015 would be materially below earnings for the corresponding period in 2014.
It added that the fourth quarter 2015 earnings also followed a similar trend with the third quarter 2015.
Managing Director, FCMB Group Plc, Mr. Peter Obaseki, said the slowdown in the third quarter continued in the fourth quarter and largely emanated from wholesale banking activities, although retail banking showed greater resilience and earnings momentum.
“Third quarter 2015 earnings as at September 2015, will be materially below earnings for the same period in 2014, due to two factors: a spike in impairments particularly in the energy sector and the significant reduction in trade finance-related revenues due to foreign exchange illiquidity,” Obaseki said.
He, however, assured that 2016 will be characterised by continued growth in retail contribution, stabilisation of wholesale banking revenues and increased focus on cost efficiencies in order to restore earnings levels.