Moody’s predicts lower profits of Nigerian banks in 2018
The US rating agency, Moody’s announces that the profits of Nigerian banks will decline in the current year.In its report, Banking System Outlook – Nigeria, Moody’s notes that despite the stabilization of currency financing and banks’ liquidity profiles, bank profits will be under pressure. The capital parameters will also decrease slightly over the 12 to 18 month period. In addition, asset quality will remain weak, but further deterioration in loan performance will be marginal as operating conditions improve slowly. “The operating conditions of Nigerian banks will continue to improve gradually over the next 12 to 18 months, but they remain difficult,” said Akin Majekodunmi, vice president and senior credit manager at Moody’s.
“Nigeria’s growth prospects remain vulnerable to world oil prices, and crude oil will remain the country’s main export commodity and its main currency generator for the foreseeable future,” he said. Moody’s expects real GDP growth to rebound over the next two years, up 0.8% from last year, which contributed to loan growth of about 10% after a contraction of 15.4% in 2017. Lastly, notes the report, “the profitability of Nigerian banks will nevertheless decrease due to lower yields on government securities, as well as a likely reduction in derivatives revenues. However, these pressures will be partially offset by a recovery in loan growth and transaction revenues related to the expansion of digital platforms. Meanwhile, non-performing loans and related provisions in the banking system will marginally increase in a late response to last year’s sluggish economic growth, and Moody’s expects them to be between 15.5% and 18% of gross loans over the period. Source: Financial Afrik