Expect poor earnings for Nigerian banks over CRR review, Analyst Say

Date:

Sanusi-Lamido-SanusiSome financial experts on Thursday attributed the mixed results released by banks on their third quarter operations to tight monetary policy of the Central Bank of Nigeria (CBN).

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They revealed to Naija247news in Lagos that the upward review of the Cash Reserve Ratio (CRR) on public sector deposits affected banks’ free funds and inter-bank operations.

NAN reports that the apex bank in July raised the CRR on public sector deposits from 12 per cent to 50 per cent which comprises deposits from all tiers of government.

The CRR is the percentage of bank’s deposits that they must keep as reserve.

The reserve ratio is one of the monetary policy instruments used to influence money supply in the financial system.

Mr Sehinde Adenagbe, the Managing Director, Standard Union Securities in Lagos, said that the tight monetary policy led to liquidity squeeze in the banking industry.

Adenagbe said that the high CRR on public sector deposits, under the new policy of the CBN, had reduced profits made by banks through lending.

He said that the development had dampened investors’ interest in banking equities on the Nigerian Stock Exchange (NSE) with fears that banks’ dividend payment in 2013 financial year might drop.

Mr Olaleye Williams, the Managing Director, GlobalView Consult & Investments in Lagos, said that the review of the CRR impacted negatively on banks’ profitability.

Williams advised banks to strengthen their deposit mobilisation strategies by reaching out to the unbanked to ensure effective lending to the real sector and increase in their revenue.

According to him, banks should concentrate on their core functions because the days when they depended solely on public sector funds to shore up profits were gone.

NAN reports that Skye Bank during the period under review declared a pre-tax profit of N14.56 billion against N16.55 billion posted in 2012, a decrease of 12 per cent.

However, the bank’s gross earnings improved by 8.40 per cent to N102.04 billion in contrast with N94.13 billion achieved in the comparative period of 2012.

Access Bank nine months pretax profit also fell by nine per cent to N35.08 billion from N38.54 billion posted in the corresponding period of 2012.

Gross earnings declined by four per cent to N154.43 billion compared with N160.39 billion declared in 2012. (NAN)

Babatunde Akinsola
Babatunde Akinsolahttps://naija247news.com
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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