MarketWatch

[fredski]

Originally Posted by riskreturn

Thanks for the comprehensive, satisfying explanation.

(1) But, given that the advantage conferred by artificially inflating the balance sheet size (through boosting of deposit) is rather apparent than real, why do banks strive to do so? Do customers perfer to do business with banks that are big only on paper and do they actually read balance sheets of banks before deciding who to do business with?

(2) If no concrete pecuniary advanatges are conferred on the banks, why should they now all go out, offering up to 20% rates to attract deposits to compensate for anticipated cessation of inter-bank depsoits at the end-December common balance sheet date, bearing in mind that such deposits could hardly be invested to earn the banks up to 20%? There must be some monetary advantages from this desperation to get deposits from retail sources and it would be appreciated if house members can shed some light on this.

(3) Then, why should the CBN lose sleep because some banks decide to embark on the vainglorious practive of artificially boosting their balance sheet sizes? Of course, I believe the CBN has not been losing sleep on this until it has now recently gone to the extent of offering outrageous interest rates on deposits because the channel of inter-bank deposits seemed to have been blocked, thereby posing adverse consequences for monetary policy.

(4) But, if this rat race quest to artificially inflate balance sheet sizes does not have any clear relationship with reported profits, why should investors lose sleep for having invested in such banks? And why should foreign investors also?

Answers to thses posers would enable us get to the roots of the problem and enable us know what is chasing us before starting to run.

I'm going to try answering these but as briefly as possible to the best of my knowledge.

(1) A Big balance sheet indicates strength, stability and confidence in you from your clients or customers. This primarily is targeted at institutional investors and rating agencies (Mostly Global).
These groups are not really interested in big dividends today but strength and longevity and long-term viability of a business. They like to see that a business especially a financial organisation can hold it's own at anytime including times of turbulence.

I was at a seminar in SA not too long ago, and some chap cracked a joke that all Nigerian banks are No 1.
These guys {our banks that is (PRIMARILY THE SO CALLED "NEW GENERATION BANKS")} Have spent so much time over manipulating the books (calling Big Big Numbers) and overselling themselves (watch CNN for the likes of Inter, Zenith and Oceanic) with fictitious figures.

They have earned in the process juicy ratings from global agencies and a lot NUMBER 1 awards but Dec year end was going to put an end to and will eventually reverse that.

(2) Seeking fixed deposits at wonder bank rates was actually a panic move and I do not believe there was a happy ending for any bank taking this path. It lacked all economic or accounting logic and will still reflect as a negative on their books.
Like the Stock brocking firms, rather than work towards the said target of dec year end, these banks spent the first half of the year back and forth from abuja "with GHANA MUST GO HAND BAGS" lobbying for a change. By the end of Q2, they hit the panic button. (They will do much of the same till next year same time) because the truth can not be hidden forever (I mean numbers never lie.. only people do)

(3)....... I really do not understand the CBN's current position. I guess they never saw such desperation from the banks and believe me there has been serious desperation (I have been receiving good morning txt messages from acc managers, wanting to know if I had a good night or weekend (Like they cared!!!))
I believe the CBN would go back to their drawing board and look at closing the loopholes. I expect added policies from the CBN to back up the December uniform year end.

(4) The Uniformed year end would inevitably expose the fictitious positions of many banks. This will lead to a downgrading of their rating at both home and abroad. Result = Drop in share price making them very easy targets for take over.

A healthy Balance Sheet indicates Strength......

As investors, what we need ask is what now?????
What are the banks going to do with those huge 20% + FIX (Possible Negative Equity?)

What now when we get back here this time next year?

[kenebobo]

Originally Posted by billions

I am not sure that the 50,000 mark support will hold if CBN did not reverse d Dec. rule.

Many supports hv been rendered null and void by d bears.I remember when proshare was saying oceanic bank has a support at abt 27 naira...now we know better.

Supports are meant to be broken as well as resistance, but when it is broken a great move in favour of the support or resistance is expected. Support and resistance guide investors alot becuase at these points market is expected to react. For example in the case of Oceanic the support was initially 27 which means that at that point sellers dont want to sell and buyers want to buy so the price moves up but the support was finally broken which lead to a further fall in price to about 20(this happens when support is broken). Whenever a support is broken, an investor should be able to map out another support point and watch the market action when it gets there. What I just want to say is that support points is very important.

From my point of view the market is recovering as a result of demand and supply and not as a result of cbn extension of dec year end for banks. if it is as a result of year end then it means the bull would be in the market for long which I doubt so much.

[zainabusman]

The bear run has taken its toll on SMN forum. This is the first time since i joined SMN in January this year that i am the only member online.

More importantly, i have noticed a steady decline of posts. It appears the bear run has taken its toll on members. Fewer people tend to be interested in stocks during a bear run compared to a bull run. I guess we all want to make loads of money but hate loosing it.

I hope we have some more postive days. Perhaps that may ignite more interest.

PS: By the time i finished my post 3 others have joined. So i was all alone maybe for 4 minutes.

[threecrown]

Originally Posted by zainabusman

The bear run has taken its toll on SMN forum. This is the first time since i joined SMN in January this year that i am the only member online.

More importantly, i have noticed a steady decline of posts. It appears the bear run has taken its toll on members. Fewer people tend to be interested in stocks during a bear run compared to a bull run. I guess we all want to make loads of money but hate loosing it.

I hope we have some more postive days. Perhaps that may ignite more interest.

PS: By the time i finished my post 3 others have joined. So i was all alone maybe for 4 minutes.

I also noticed that of recent, you and billion have been coming online by this time of the night. It is hipsy that i usually notice online by this time. Are u sure it is not the bears in town that has been keeping you awake? Money matter, na wa o.

[zubychyle]

Originally Posted by zainabusman

The bear run has taken its toll on SMN forum. This is the first time since i joined SMN in January this year that i am the only member online.

More importantly, i have noticed a steady decline of posts. It appears the bear run has taken its toll on members. Fewer people tend to be interested in stocks during a bear run compared to a bull run. I guess we all want to make loads of money but hate loosing it.

I hope we have some more postive days. Perhaps that may ignite more interest.

PS: By the time i finished my post 3 others have joined. So i was all alone maybe for 4 minutes.

I guess the bears has taken it's toll on our members.Most of us usually get very downcast and sullen during the bears while some like me are just experiencing it for the first time and to be candid it hasn't been funny seeing a stock you've made up to 70% go into the red by almost 20%. Anyway it's a learning curve and i believe one stands to learn a lot from it.

zainabusman, i read your posts all the time and i must say you're one of the best contributors to this forum.

cheers.

[knightofdelta]

Originally Posted by fredski

I'm going to try answering these but as briefly as possible to the best of my knowledge.

(1) A Big balance sheet indicates strength, stability and confidence in you from your clients or customers. This primarily is targeted at institutional investors and rating agencies (Mostly Global).
These groups are not really interested in big dividends today but strength and longevity and long-term viability of a business. They like to see that a business especially a financial organisation can hold it's own at anytime including times of turbulence.

I was at a seminar in SA not too long ago, and some chap cracked a joke that all Nigerian banks are No 1.
These guys {our banks that is (PRIMARILY THE SO CALLED "NEW GENERATION BANKS")} Have spent so much time over manipulating the books (calling Big Big Numbers) and overselling themselves (watch CNN for the likes of Inter, Zenith and Oceanic) with fictitious figures.

They have earned in the process juicy ratings from global agencies and a lot NUMBER 1 awards but Dec year end was going to put an end to and will eventually reverse that.

(2) Seeking fixed deposits at wonder bank rates was actually a panic move and I do not believe there was a happy ending for any bank taking this path. It lacked all economic or accounting logic and will still reflect as a negative on their books.
Like the Stock brocking firms, rather than work towards the said target of dec year end, these banks spent the first half of the year back and forth from abuja "with GHANA MUST GO HAND BAGS" lobbying for a change. By the end of Q2, they hit the panic button. (They will do much of the same till next year same time) because the truth can not be hidden forever (I mean numbers never lie.. only people do)

(3)....... I really do not understand the CBN's current position. I guess they never saw such desperation from the banks and believe me there has been serious desperation (I have been receiving good morning txt messages from acc managers, wanting to know if I had a good night or weekend (Like they cared!!!))
I believe the CBN would go back to their drawing board and look at closing the loopholes. I expect added policies from the CBN to back up the December uniform year end.

(4) The Uniformed year end would inevitably expose the fictitious positions of many banks. This will lead to a downgrading of their rating at both home and abroad. Result = Drop in share price making them very easy targets for take over.

A healthy Balance Sheet indicates Strength......

As investors, what we need ask is what now?????
What are the banks going to do with those huge 20% + FIX (Possible Negative Equity?)

What now when we get back here this time next year?

Food for thought.

[hispy99]

Originally Posted by zainabusman

The bear run has taken its toll on SMN forum. This is the first time since i joined SMN in January this year that i am the only member online.

More importantly, i have noticed a steady decline of posts. It appears the bear run has taken its toll on members. Fewer people tend to be interested in stocks during a bear run compared to a bull run. I guess we all want to make loads of money but hate loosing it.

I hope we have some more postive days. Perhaps that may ignite more interest.

PS: By the time i finished my post 3 others have joined. So i was all alone maybe for 4 minutes.

pele...I have been online alone mamy many times ....

[zainabusman]

Originally Posted by hispy99

pele...I have been online alone mamy many times ....

Good for u. For me it was a new experience. As someone said maybe the bears are keeping me up! Anyway i am a late bird and have some reading to do.

[riskreturn]

Originally Posted by fredski

I'm going to try answering these but as briefly as possible to the best of my knowledge.

(1) A Big balance sheet indicates strength, stability and confidence in you from your clients or customers. This primarily is targeted at institutional investors and rating agencies (Mostly Global).
These groups are not really interested in big dividends today but strength and longevity and long-term viability of a business. They like to see that a business especially a financial organisation can hold it's own at anytime including times of turbulence.

I was at a seminar in SA not too long ago, and some chap cracked a joke that all Nigerian banks are No 1.
These guys {our banks that is (PRIMARILY THE SO CALLED "NEW GENERATION BANKS")} Have spent so much time over manipulating the books (calling Big Big Numbers) and overselling themselves (watch CNN for the likes of Inter, Zenith and Oceanic) with fictitious figures.

They have earned in the process juicy ratings from global agencies and a lot NUMBER 1 awards but Dec year end was going to put an end to and will eventually reverse that.

(2) Seeking fixed deposits at wonder bank rates was actually a panic move and I do not believe there was a happy ending for any bank taking this path. It lacked all economic or accounting logic and will still reflect as a negative on their books.
Like the Stock brocking firms, rather than work towards the said target of dec year end, these banks spent the first half of the year back and forth from abuja "with GHANA MUST GO HAND BAGS" lobbying for a change. By the end of Q2, they hit the panic button. (They will do much of the same till next year same time) because the truth can not be hidden forever (I mean numbers never lie.. only people do)

(3)....... I really do not understand the CBN's current position. I guess they never saw such desperation from the banks and believe me there has been serious desperation (I have been receiving good morning txt messages from acc managers, wanting to know if I had a good night or weekend (Like they cared!!!))
I believe the CBN would go back to their drawing board and look at closing the loopholes. I expect added policies from the CBN to back up the December uniform year end.

(4) The Uniformed year end would inevitably expose the fictitious positions of many banks. This will lead to a downgrading of their rating at both home and abroad. Result = Drop in share price making them very easy targets for take over.

A healthy Balance Sheet indicates Strength......

As investors, what we need ask is what now?????
What are the banks going to do with those huge 20% + FIX (Possible Negative Equity?)

What now when we get back here this time next year?

Your comprehensive explanation is very enlightening.

But, as a follow-up, if artificial, bloated balance sheet is a goal pursued by Nigerian banks, how do we explain, as an example, Bank PHB being the first to initiate this payment of Wonder Bank deposit rates of 18% (as indicated in the thread for that bank) while, at the same time, it is the one that sourced greatest funds (over 0.2 trillion Naira from both the PO and PP combined) in the history of Nigerian capital market. Can we then posit a positive correlation between the volum of funds raised from the capital market and desperation for deposits, or what? Could it be because they want a proper mix between shareholders' funds and deposit liabilities so that the greater the size of the former, the more desperate they would become to increase the latter so as to restore a proper balance immediately?

[zainabusman]

Originally Posted by riskreturn

Your comprehensive explanation is very enlightening.

But, as a follow-up, if artificial, bloated balance sheet is a goal pursued by Nigerian banks, how do we explain, as an example, Bank PHB being the first to initiate this payment of Wonder Bank deposit rates of 18% (as indicated in the thread for that bank) while, at the same time, it is the one that sourced greatest funds (over 0.2 trillion Naira from both the PO and PP combined) in the history of Nigerian capital market. Can we then posit a positive correlation between the volum of funds raised from the capital market and desperation for deposits, or what? Could it be because they want a proper mix between shareholders' funds and deposit liabilities so that the greater the size of the former, the more desperate they would become to increase the latter so as to restore a proper balance immediately?

I think FBN took in more than PHB.

Your theory is possible. But to be so desperate as to offer such rates does not make much sense. The goal should be to have cheap liabilities not expensive ones. And there is no regulatory requirement with regards to the size of ur capital compared to deposits.

Unfortunately it appears we may not have marketing staff of banks in our midst. They are the ones may be able to provide more insight.

[Apache]

Originally Posted by hispy99

pele...I have been online alone mamy many times ....

lonely, i am so lonely, i have nobody, to call....

[fredski]

Originally Posted by riskreturn

Your comprehensive explanation is very enlightening.

But, as a follow-up, if artificial, bloated balance sheet is a goal pursued by Nigerian banks, how do we explain, as an example, Bank PHB being the first to initiate this payment of Wonder Bank deposit rates of 18% (as indicated in the thread for that bank) while, at the same time, it is the one that sourced greatest funds (over 0.2 trillion Naira from both the PO and PP combined) in the history of Nigerian capital market. Can we then posit a positive correlation between the volum of funds raised from the capital market and desperation for deposits, or what? Could it be because they want a proper mix between shareholders' funds and deposit liabilities so that the greater the size of the former, the more desperate they would become to increase the latter so as to restore a proper balance immediately?

Great point you have there..... But it raises the question. What are they doing with the money or how are they actually applying it.

These new banks want to be like First and Union banks but in less than 2 years. First bank (Originaly Standard Bank) and Union Bank (Barcleys Bank) where built on solid foundation with real, proven asset base. All built over time.
There is nothing wrong with the Billions or Trillions they raked in through PP, RI and PO, Just that these funds need to work over time.

A good chunk of monies raised go into Branch expansion, IT upgrades, Promotions, Marketing, Advertising etal with the rest going into investment, the rest being not much. And where are the investment out lets? Outside of oil and Gas (the Marketing side only (Peanuts in real term compared to Upstream)), Managing Goverment accounts, and the stock market, these guys really do not do much real investing. Low on Synegy High on Hype.

One needs also to look at the composition of most of these New Generation Banks...

[waaan5]

Originally Posted by zainabusman

Good for u. For me it was a new experience. As someone said maybe the bears are keeping me up! Anyway i am a late bird and have some reading to do.

Time zone must also account for why hisppy would be online alone a couple of times. Talk of "critical SMN mass" yet to be developed in certain geographical locations.

Zainabusman, pls keep the good work. Bear or no bear, many admire you (myself the chief) for your immense contributions to the SMN.

[billions]

Another positive day...it appears dat insurance stocks did better today.