• Investors in 10 Banks to Lose N29bn to New Export Fund

Indications emerged last week that about N30 billion would be pulled out from distributable profits of 10 banks to honour Nigerian Bankers Committees’ (NBC) decision to fund the Central Bank of Nigeria’s, (CBN) export fund in 2017.

The figure would be far above the N25 billion CBN had projected for the first year (2017) as last week’s Zenith Bank Plc’s results, the first to be announced so far, already show a significant overshoot of that estimate.

The leading 10 out of 26 banks in the country are set to announce figures that would cumulatively overshoot the CBN’s estimate.

NBC had last month directed that deposit money banks in Nigeria, from the 2016 audited accounts, will set aside 5 percent of their profit after tax (PAT) and pay same into a pool fund to finance Nigerian export businesses or businesses with import substitution capabilities.

This effectively takes away a significant portion of money from equity investors’ benefits in the quoted banks.

Impact on the Banks

Based on the Full Year 2016 PAT estimates put together by Cardinal Stone Partners, a Lagos based investment house, on their coverage banks, total exposure will amount to N29.3 billion. The Cardinal Stone Reports also indicated the relative exposure of each of the banks.

According to the report, in absolute terms, Guaranty Trust Bank Plc (GTB) has the largest exposure with an expected contribution of N7.1 billion (24% of total sector contribution) whilst Diamond Bank Plc will be the least exposed with an expected contribution of N0.4 billion (1% of total sector contribution). Nigerian banks have consistently paid dividends, with top tier banks such as GTB and Zenith Bank Plc paying as much as 45% of PAT.

At the backdrop of this the analysts at Cardinal Stone stated: ‘‘After incorporating the impact of this development on FY’16 expected dividends, we estimate an average 5% drop in dividend per share, translating to an average expected dividend yield of 12% for FY’16.

‘‘Finally, the policy’s impact on our valuation is immaterial as our recommendations remain largely unchanged.

‘‘However, Access Bank Plc and Ecobank Transnational which previously had “BUY” recommendations have been downgraded to a HOLD.

Briefing journalists at the end of the January 2017 NBC meeting, Alhaji Ahmed Abdullahi, Director, Banking Supervision Department, CBN, said the initiative was to support the federal government’s drive to create and deepen a non-oil economy.

The Bankers Committee considered it necessary “to support the effort of the government in diversifying the economy by coming up with an initiative that will help with export drive and import substitution,” he said.

“Therefore, the committee has decided that we will be contributing 5 percent of each bank’s profit after tax in a pool of funds that will be kept at the Central Bank of Nigeria (CBN) and it will be used to finance eligible bankable projects that are meant for export or import substitution.

“The scheme will be controlled by the members of the Bankers Committee. There will be a project review committee that will review submissions from entrepreneurs that require funding. The committee will make a recommendation to the Board of Trustees of the Bankers Committee,” he explained.

He said each bank has an equity holding in the scheme based on its annual contribution from its annual profits.

Abdullahi said the scheme will start from the 2016 financials. “Banks have submitted their 2016 statement of accounts and they are to be published not later than April, 2017. So we are starting the programme this year using 2016 financials of banks. Any industry that is going to be export driven will benefit. Similarly, any industry that will provide import substitution will also benefit,” he said.

Based on the banks’ last three years profit and loss accounts, we estimate about N25 billion will be contributed annually by the banks,” he said.