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Yellen Growth Outlook Change on Weak Job-Market

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Janet Yellen

By offering a subtle change to her outlook from less than a week ago, Federal Reserve Chair Janet Yellen pushed the prospect of additional interest rate increases further into the future.

The head of the central bank said she and her colleagues were on watch for whether, rather than when, the U.S. economy would show clear signs of improvement, acknowledging the possibility that growth would be slow to pick up.

“Proceeding cautiously in raising the federal funds rate will allow us to keep the monetary support to economic growth in place while we assess whether growth is returning to a moderate pace, whether the labor market will strengthen further, and whether inflation will continue to make progress toward our 2 percent objective,” Yellen said in testimony Tuesday before the Senate Banking Committee in Washington.

Just six days ago, Yellen said a cautious approach to interest-rate hikes “will allow us to verify” that growth, jobs and inflation are improving.

Yellen, 69, opened two days of semiannual monetary-policy hearings saying that despite her own optimism about the economy’s longer-run prospects, “we cannot rule out the possibility expressed by some prominent economists that the slow productivity growth seen in recent years will continue into the future.”

Yellen’s remarks move her closer to the argument made for some time by former Treasury Secretary Lawrence Summers that forces holding down growth and interest rates may be long-lasting. St. Louis Fed President James Bullard, who until recently had taken a more hawkish stance on policy, also shifted his views in a paper published last week suggesting the U.S. economy is stuck in a rut for at least the next two to three years.

Responding to questions from lawmakers, Yellen said the odds of a U.S. recession were low. She also said the central bank stood ready to act if needed in the event U.K. voters decide later this week to leave the EU, causing financial-market turmoil.

“We will closely monitor what the economic consequences will be and are prepared to act in light of that assessment,” she said.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

Despite Economic Headwinds, FBN Holdings Grows Profit by 100% in 2021 Financial Year

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FBN Holdings Plc, Nigeria’s leading financial institution, has exceeded all expectations in the financial year ended December 31, 2021 as profit after tax jumped a whopping 100% to ₦151.1 billion.

The bank disclosed this in its audited financial statement obtained by Investors King.

Gross earnings grew by 28.2% to ₦757.3 billion, up from  ₦590.7 billion filed in the 2020 financial year. Operating income also inched higher by 35.5% in the year under review to ₦592.8 billion from ₦437.6 billion filed in the corresponding year of 2020.

As expected, operating expenses stood at ₦334.2 billion in 2021, representing an increase of 14.2% from ₦292.5 billion achieved in the 2020 financial year. The growth was broad-based as the lender’s profit before tax jumped 99.1% to ₦166.7 billion from ₦83.7 billion while profit after tax rose from ₦75.6 billion in 2020 to ₦151.1 billion in 2021, an increase of 99.9%.

Similarly, earnings per share improved by 70.2% to N4.17 from N2.45 in the same period of 2020.

However, interest income dipped by 4.1% from ₦384.8 billion in 2020 to ₦369 billion in 2021, largely due to the moderated interest rate environment that negatively dragged on yields.

Therefore, to mitigate the effect of the low-interest rate, FBN Holdings intensified deposit mobilisation and funding strategy that help enhance loan growth at optimised rates, leading to a 5.7% increase in interest expense to ₦140.8 billion from ₦133.2 billion in 2020. As a result, net interest income declined by 9.3% to ₦228.2 billion.

Conversely, non-interest revenue grew by 96.1% to ₦364.6 billion from ₦185.9 billion in 2020 on the back of increased fees and commission income, treasury activities and other operating income.

Commenting on the results, Dr. Adesola Adeduntan, Chief Executive Officer of FirstBank Group said: “Following years of strategic restructuring of the Bank’s balance sheet and operations, the Commercial Banking business is beginning to transition into a sustained growth phase delivering performance commensurate to the size of our business and capabilities of our people. Profit before tax is up 77.9%, gross earnings 30.3%, total assets 15.9% and customer deposits up 19.5%.

“This performance was driven by a relentless focus on the needs of customers and improving the competitiveness of our offerings. We have sharpened our ‘Go To Market’ approach to better leverage the opportunities which our large scale provides in addition to becoming more relevant to our clients by improving our value propositions.

“This performance is also in line with the Bank’s Quantum Profitability Leap agenda which seeks to ensure that we fully maximise the revenue generating capacity of our business to boost the bottom line and fulfil the expectations of all stakeholders in the business.

“The demonstrated resilience of our franchise to headwinds and excellent risk management capabilities place us in a good position to weather any macro-economic shocks which may arise due to the volatile nature of current operating environment. Our Non-performing loans ratio at the end of the year was 6.1% which represents significant progress towards those of other Tier 1 banks and the regulatory threshold of 5.0%.

“We will continue to leverage our investments in digital platforms, IT infrastructure, people, and pan-African operations to ensure this growth trend is sustained”.

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Banking Sector

Jubilation as Court Orders CBN, NDIC to Pay Bank Workers N5.7 Billion

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First Bank

Jubilation erupts as the bank representatives received a judgment in their favour as the National Industrial Court ordered the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) to pay over N5.7bn terminal benefits to over 1,000 bank workers affected by the re-capitalisation exercise of 2006.

The court ordered the CBN and NDIC to pay the money within three months, starting from the day the judgment was issued, and will start attracting 10 percent interest thereafter.

While delivering the judgment on Monday, Justice Paul Bassi ordered the two bodies to pay another N10m as general damages to the claimants.

Justice Bassi overlooked the earlier objections raised by the defendants and while the two parties, CBN and NDIC have acted in the general good by raising the capital base of banks in the country, and should not be affected to the detriment of the former employees, Investors King observed. 

According to a media report, “By revoking the banking licenses of the non-consolidated banks, the defendants interfered with the employment contracts of the bank workers, a contract which would ordinarily have run its natural course with the claimants paid their benefits at the end.

The banking institutions have been in the tussle with one another since the consolidation exercise of 2006 that led banks to recapitalise from N2bn to N25bn.

The banks did not meet the expected requirement for the recapitalisation requirements and their banking licenses were revoked by the apex which later placed the NDIC as the liquidator. This led the bank workers to sue the two organisations while they demanded their terminal benefits. 

The two defendants objected to different issues saying that they “were not the employers of the workers and the suit disclosed no cause of action against them.”

Over one thousand people had approached the court since 2018.

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Loans

Borrowing Rate of ICT Firms Rises by N30 Billion in March 2022

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Services Tax

The Central Bank of Nigeria (CBN) has revealed that loans obtained by Information and Communication Technology (ICT) firms have risen to a sum of N982.87bn in March, as against January’s N952.06bn, an increase of N30.81 billion.

According to the CBN sectoral analysis of credit report, loans were N952.06bn in January, N973.51bn in February, and N982.87bn in March.

Investors King gathered that prior to this, the CBN had established a legal framework for Open Banking in Nigeria in an effort to stimulate innovation and widen the range of financial products and services available to banks’ customers.

The Regulatory Framework for Open Banking in Nigeria, according to the CBN, establishes standards for data sharing across the banking and payments systems in order to stimulate innovation and expand the range of financial products and services available to bank customers.

Recall that in January, the CBN Governor, Godwin Emefiele had stated that “the policy focus of the bank for 2022 is with a pledge to sustain improved access to finance and credit for households and businesses, mobilise investment to boost domestic productivity, enable faster growth of non-oil exports, and support employment generating activities”.

He claimed that the country was able to alleviate some of the COVID-19 outbreak’s economic consequences.

He further stressed the necessity of all stakeholders cooperating to build a more resilient economy that can survive external shocks while still supporting growth and wealth creation in key areas.

Speaking about the importance of creating an efficient infrastructure ecosystem in Nigeria and the importance of improved infrastructure in the development of the Nigerian economy, he revealed that all necessary approvals had been obtained for the Infrastructure Corporation to begin operations in early 2022.

Further findings by Investors King revealed that the ICT sector, in the first quarter of 2022, recorded a growth at 20.54 per cent (year-on-year), 12.68 per cent points increase from the rate of 7.86 per cent recorded in the same quarter of 2021, and 14.84 per cent points higher than the rate recorded in the preceding quarter. The Quarter-on- Quarter growth rate recorded in the first quarter of 2022 was -1.87 per cent.

“The Information and Communications sector contributed 10.55 per cent to the total Nominal GDP in the 2022 first quarter, higher than the rate of 9.91 per cent recorded in the same quarter of 2021 and higher than the 9.88 cent it contributed in the preceding quarter”, the report noted.

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