Money Markets
By George Bodo
In Summary
- It seems investors are increasingly getting skeptical about the future prospects of bank stocks, and in most cases their concerns are valid.
- Volatility in directives by central banks and reduced earnings yield negative emotions.
There is increasing investor flight out of
middle Africa’s bank stocks and it seems investors could be losing faith
in the growth prospects of the region’s banks.
For definition purposes, Middle Africa is sub-Saharan Africa excluding South Africa, Angola, Botswana and Mozambique.
In the first quarter of 2014, the region’s three
key markets by size and liquidity levels — Nigeria, Kenya and Ghana —
recorded significant decline in bank stock performances on a
year-on-year basis.
The stocks returned a consolidated average
performance of just two per cent, compared to the 33 per cent they
posted in a similar quarter of 2013.
The three countries together have a total of 89
commercial banks out of which 32 are publicly listed — the Nigerian
Stock Exchange has 13 listed banks, the Nairobi Securities Exchange has
11 while the Ghana Stock Exchange has eight listed banks.
From a performance perspective, Ghana still tops
the three markets. In the just ended quarter, Ghanaian bank stocks
returned an average performance of 15 per cent, their Kenyan peers
returned six per cent while Nigerian bank stocks returned 16 per cent.
However, if viewed on a year-on-year basis, these
performances significantly declined, from 50 per cent for Ghana, 33 per
cent for Kenya and 17 per cent for Nigeria in the first quarter of 2013.
It seems investors are increasingly getting
skeptical about the future prospects of bank stocks, and in most cases
their concerns are valid.
The Central Bank of Nigeria continues to rattle
banks with its series of indirect monetary policy stances. In January
2014, the bank asked all the 20 commercial banks to relinquish 75 per
cent of the deposits they had sourced from the public sector, a
directive estimated to have wiped out about $6 billion of liquidity from
Nigeria’s banking system.
In April, the bank again asked Nigerian commercial
banks to relinquish 15 per cent of all deposits from the private sector
— a three per cent increase from the previous 12 percent — sterilising a
further $1.4 billion from the system.
These kinds of directives typically weaken banks’ earning potentials by increasing the opportunity costs
.
.
In Kenya, there has been continuing concerns
regarding non-perfoming loans and banks overstating their true
performance. For instance, among the tier 1 banks, there was a big
divergence between the year-on-year growth rates in interest income from
loans and advances to customers and the loan book itself in 2013 (-5
per cent versus 13 per cent).
This phenomenon suggests that banks could be slow
at recognising and classifying their non-perfoming assets. In fact,
foreign investors were net sellers of Kenyan bank stocks in first
quarter 2014 to the tune of Sh1.5 billion.
The Bank of Ghana asked all banks to relinquish 11
per cent of deposits, from the previous ratio of nine per cent, a
directive that took effect this month and is expected to have sterilised
significant system-wide liquidity.
No comments :
Post a Comment