Originally Posted by hispy99 (Post 27812)

Nigerian Banking Sector, High Risk – S&P

By Moses Obajemu, 08.14.2008

Banking

Standard and Poor’s Ratings Services (S&P), a leading international rating agency, has described the Nigerian banking sector as a high risk one in a global context. S&P based its judgement ranking on its Bank Industry Country Risk Assessment.

It said the low ranking on the banking system in Nigeria (foreign currency BB-/stable/B) reflects the high operational and credit risks facing the very young and increasingly competitive bankings sector.

“High operational risks include unstable politics, a weak judiciary, poor corporate governance, internal security problems, and infrastructural deficiencies. These risks are a legacy from the old military dictatorships, which by means of chronic underinvestment and economic mismanagement, have caused poor infrastructure, low wealth, and poor development levels that are currently encumbering Nigeria today”, the report said.

The rating agency said the situation has raised credit risk and restricted financial intermediation for the banks by creating a concentrated economy, low development levels and a large informal work force.

On a positive note, the company said non-performing loans which were once high, are now reducing alongside the positive economy and high write offs.
The report added that since December 2005, mass consolidation of the banking sector, which reduced the sector to 25 banks from 89 banks, transparency, innovation and competirion have all increased.

“Supported by high global oil prices, Nigeria’s current high economic growth and the public and emerging private sector’s financing needs are creating a boom for Nigerian banks. Subsequently, the financial performance of the Tier 1 banks is currently very good, with robust capital levels, good profitability, and strong funding and liquidity profiles”, S&P said.

On credit risk, S&P said low individual wealth levels, an underdeveloped private sector, and a highly liquid public sector have kept financial intermediation levels low in Nigeria. However, it said credit growth has been very high in the past three year, with Tier 1 banks recording high yearly growth of double or even triple figures of their loan portfolios.

Speaking on the report on Nigerian banks at a briefing in Lagos yesterday, officials of S&P said the problem in the Niger Delta, the energy crisis, and infrastructural problems have all combined to affect improved sovereign rating of the country and the banks.

Managing Directorof S&P in South Africa and Sub Saharan Africa, Mr. Konrad Reuss, said the authorities needed to address the Niger Delta problem, which affects oil production as well as giving more momentum to the economic reforms in the country to earn higher rating. A rating analyst with the company, Mathew Pirnie, identified the weaknesses of the Nigerian banking systems as high operational risk due to nascent politics, high credit risk due to low development and competitive and young banking sector.
Pirnie said the current macro economic environment supports banks’ growth and development. Other strengths of the industry, he said. Include significant oil and gas resources, positive banking reforms and good liquidity and capitalisation of Tier1 banks.

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by Ahaah (Post 37573)

The Sun News On-line | Business news

Many Nigerian banks are distressed, expert insists
By KELECHI MGBOJI
Thursday, January 1, 2009

More Stories on This Section

Dr. Martin Oluba, a seasoned financial analyst has faulted claims by the Central Bank of Nigeria (CBN) that Nigerian banks are financially sound and healthy, insisting that a whole lot of them including those regarded as big are already distressed noting that the signs were already clear that they are distressed.

To buttress his arguement, he said that a study conducted few weeks ago by a foreign institution to which he was invited as partner stumbled on shocking revelations that made them conclude that many banks might have more problems than they currently show.

He said "They presented some of these studies to bank chief executive Officers. But they did not present some of the more shocking details to some of them. But if they are people who can put two and three together, they would know some of the banks that are going down. Even some of the so called big banks did not even make it in line with the popular awards that they got from some organisations".

According to the professor of economics, when a central bank expands its discount window from 24 hours to 365 days, admitting other securities that had not hitherto been admitted, it is a sign of distress. He stressed that what that means was giving opportunity for banks to access ample liquidity to survive.
He noted that CBN's policy reversal in releasing N1.3 trillion through manipulations of Cash Reserve Requirement (CRR) and Liquidity Ratio was all intended to help manage the financial crisis facing the nation's finance houses.

"Ignore CBN's denials. Banks are in crisis; a whole lot of them are in crisis. I heard that there is a bank, a frontline bank for that matter which has been cutting down its staff salary. Why? They are adjusting. Adjustment has become very necessary in managing the situation"|, said the expert.
Oluba who presides over Value Fronteira Limited, a cerebral policy analysis and consultancy outfit based in Lagos, traced the genesis of banks' financial crisis back to three major factors including current meltdown in the capital market, massive withdrawal of funds by foreign investors, and the unprecedented fall of oil prices in the international market.

In his words "A lot of them lost money in the capital market, the foreign institutions that they used to carry out their acquisitions during consolidation have left with their funds; the paper engineering that they used to acquire stakes in banks during consolidation, the money is not there; their direct engagement in oil importation when the price was $147, they didn't know it was going to crash to what it is today. How can they deny the obvious?"

He stated that all investment windows for banks having collapsed, it was hard for them to deny they were passing through financial distress citing a publication which reported that a certain foreign investor withdrew $3 billion in the month of October alone.
It would be recalled that recently Nigeria Deposit Insurance Corporation (NDIC) gave a clean bill of health to only four banks, rated 16 banks as satisfactory, and dismissed four others as unsatisfactory while it said that one bank had a problem.

But Dr. Oluba took the verdict of the NDIC with a pinch of salt insisting that "In an environment where companies engineer accounts, I will discount those conclusions because I know that most banks, the accounts they give to Securities and Exchange Commission (SEC) is different from the one they give to Nigerian Stock Exchange (NSE), NDIC, CBN, and FIRS depending on what they want to achieve.
"For this reason I will doubt the conclusion of NDIC and discount it by 30 percent. And if you do that, you end up having more unsatisfactory banks. Of course, when a government institution tells you that the establishment it supervises is unsatisfactory in its state of health, then you know that the problem is much more than that, and a lot of lobbying would have taken place".

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by bivins1 (Post 37576)

Kod na wetin u study? u be "winch" for book. I am amazed at your brilliance. More grease to your elbows and i will donate 1 % of my portfolio when it recovers. you too much

Originally Posted by bivins1 (Post 37576)

Kod na wetin u study? u be "winch" for book. I am amazed at your brilliance. More grease to your elbows and i will donate 1 % of my portfolio when it recovers. you too much

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...

Originally Posted by wanaj0 (Post 37642)

Kudos for the work done.

Not sure of the accuracy of the EPS/PE. That of FCMB stands out! There must be some error somewhere. FCMB EPS should be >1 and the PE should definitely be less than 7.00.

Also in recommending stocks for income would have thought dividend yield will be a better yardstick rather than absolute dividend figure.

All in all, good analysis. Afribank and FCMB are realling looking attractive BUT one need to look at the FACTS behind the FIGURES. Like you said, figures don't always tell the whole story.

Originally Posted by knightofdelta (Post 37563)

I was thinking of posting this on Marketwatch but decided against it. It will be a good idea if this stays here to make things neater.

This is my New Year gift to all SMN members. You have the whole weekend to reshuffle your portfolio if you want. A large investment bank paid me for this and fortunately there was no agreement between us for me not to distribute this.

It will be a good idea to be strategically placed before the market makers take all the mispricings away.

Cheers...