Analysts at Coronation Research, a publication of Coronation Merchant Bank, have stated that they anticipate an improvement in lenders’ earnings in H2’22 as a result of the Central Bank of Nigeria’s (CBN) raising the interest rate.
This prediction comes as financial experts and investors continue to evaluate H1’22 results that were recently released by banks. The analysts observed in a recent study titled “The Markets in Review: Nigerian Banks H1’22 Scorecard” that although the performance of DMBs that have so far reported their H1’22 results was “acceptable,” the reported earnings, when annualized, substantially underperformed analyst’s consensus projections.
Overall, the results across the banks were decent, with all registering growth in Net profits with the exception of one (Guaranty Trust HoldCo), the analysts explained.
The majority of the reported earnings, when annualized, fell short of analyst consensus predictions by a significant amount, indicating that the earnings growth was insufficient to meet the market’s optimistic expectations.
As a result, the decline in bank stock prices that started at the beginning of May carried over into Q3. The share prices of our covered banks have all fallen since the end of July, when results started to trickle in (with the exception of Stanbic IBTC Holdings, which produced earnings that were above expectations).
They further stated:
“Most of our covered banks doubled-down on their core function, with net interest income (NII) growing by an average of 24.8 per cent y/y and accounting for an average of 55.7 per cent of the net revenues. With asset yields still low and limited room for Net Interest Margin (NIM) expansion, the major income growth driver for our coverage banks was increased risk asset creation as they grew their loan books by an average of 8.5 per cent Y-T-D during H1’22.”