Nigerian banks may be on the road to recovery as a recent report by Investment firm, Afrinvest reported a 23.7% increase in net income by year end 2010 amounting to about N192.7 billion. “Analysts say that the rise in income is not unconnected with the decline in loan provisioning and aggregate charges that have gone down by 4.8 percent and 67.1 percent, respectively.”
According to Afrinvest, “by the end of 2010, Nigerian banks (excluding rescued banks) reported an industry total net income of N192.7 billion ($1.2 billion). While a year-on-year comparable analysis of this performance is difficult owing to the uneven reporting periods by banks in December 2009, this figure represents a 23.7 percent increase compared to their position as at September 30, 2010.”
“The low interest rate environment prevalent in 2010 weighed down on yields as average net interest margins for the sector recorded a 70bps decline from 9.4 percent in 2009 to 8.7 percent in 2010,” it added.
“Despite a 7.3 percent increase in operating expenses, which in our view merely reflects inflationary effect on expense profile, Cost-to-Income ratio remained relatively flat at 68.1 percent. Top-tier banks however demonstrated a greater level of efficiency in lending, with a Cost-to-Income ratio of 59 percent lower than the middle-tier average of 72 percent,” the report noted.
For more African Investment analysis, visit Afrinvest.