Forced Interest On Savings Stagnates FBNH’s Profit

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First Bank of Nigeria Plc, a subsidiary of FBN Holdings Plc (FBNH) said its financial performance for the year ended December 2013 may be stagnated following the Central Bank of Nigeria’s directives that banks increase interest rates paid on savings.

According to the bank, the forced interest on savings cost it N5 billion during the year. It also said that the prospects for growth in performance was further hindered by a reduction in commission on sales costing it another N10 billion.

These two factors put together alone, cost the bank N15 billion, according to a report by Bloomberg.

FBN Holdings Plc (FBNH), owner of First Bank Nigeria, said its profit for 2013 will probably be the same as the previous year’s as tougher regulatory requirements increased its costs.

Managing Director and Chief Executive of FBN ,Bisi Onasanya, told Bloomberg at the weekend that a sale of about N150 billion  in treasury bills, placed with the central bank at an interest rate of zero per cent, also hurt the bank’s income.

The increase in interest on savings “was something not budgeted for by the bank. Barring any additional pronouncements by the government, we will be achieving our 2012 numbers” he said. FBN reported 2012 net income of N75.7 billion, more than triple the previous year’s.

The CBN had increased the cash-reserve requirement for federal, state and local government deposits to 50 per cent from 12 per cent in July to reduce liquidity and support the naira. The regulator also told lenders to lower fees and commissions from April 2013 to prevent potential conflict with clients.

FBN’s profit declined by eight per cent to N59.1 billion  in the nine months through September from N64.3 billion in the previous year, as cost of funds increased to 3.2 per cent from 2.4 per cent, the lender said in a December 31 filing to the Nigerian Stock Exchange (NSE).

Onasanya said the bank plans to increase its loan book by 10 per cent to 15 per cent in 2014 from five per cent growth in the nine months through September to boost its income, adding that it was also seeking an acquisition to expand into general insurance from life insurance.

First Bank “has many deals in the pipeline including the divestment of Shell and Chevron assets,” he said. Oil and gas explorers Royal Dutch Shell Plc (RDSA) and US-based Chevron Corp. are selling onshore and shallow-water assets amid persistent unrest and crude-oil theft in the Niger Delta.

Banks are returning to profitability after CBN Governor Lamido Sanusi approved a N620 billion  bank bailout in 2008 and 2009 as loans to equity speculators and fuel importers pushed the industry near collapse. The government then created the Asset Management Corporation of Nigeria (AMCON) to buy banks’ bad debts.

FBN shares declined 0.1 per cent to N16.29 at close of trading in Lagos. They have fallen 4.7 per cent in the past year, compared with a 45 per cent gain on the Nigerian Stock Exchange All Share Index.



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