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Banks to Experience Severe Credit Losses in Late 2021 – Mckinsey & Company



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The crisis of 2008 came from within the financial services industry. Today, in this crisis of the real economy, banks are economically afflicted alongside other sectors in society. But banks are also playing an important role in helping society through the crisis: as the conduit for state support, supporting small businesses, companies and individual citizens.

The crisis is delivering, in effect, the biggest stress test to banks, a test which the industry is withstanding to-date, whilst demonstrating resilience and purpose. The impact of the last year without the role the industry has played is likely much deeper.

Going forward, McKinsey anticipates the test presented for banks by the pandemic will evolve in two stages in the months and years ahead. First will come severe credit losses, likely through late 2021; almost all banks and banking systems are expected to survive. Then, amid a muted global recovery, banks will face a profound challenge to ongoing operations that may persist beyond 2024.

  • Depending on scenario, average return on equity globally would continue its decline, from 8.9 percent in 2019 to 4.9 percent in 2020 to 1.5 percent in 2021. At the trough in 2021, ROE would fall to −1.1 percent in North America, −1.8 percent in Europe, and −0.2 percent in developed Asia. ROE would fall from higher starting levels and bottom out higher in emerging Asia (2.6 percent), the Middle East and Africa (MEA; 3.7 percent), and Latin America (5.2 percent); and it would take a smaller dip to 8.6 percent in China.
  • African banks enjoyed one of the highest ROEs in the world, however the overall ROE is expected to half at 7.6 percent in next 2 years, while revenues after risk may decline by 15 percent in a muted recovery scenario. In the short term, banks will be affected by cascading credit losses resulting in 50 percent impact on revenues while in the long term, continued pressure on margins and moderate volume growth might dwarf the revenue growth to half of pre-COVID-19 levels.
  • The onset of recovery is likely to vary by country as level of provisioning done by banks in 2020 will be a deciding factor if they will see V- or U-shaped recovery. In SA and Kenya, banks have already provisioned highly for potential bad debts while Morocco and Nigeria may continue to increase provisions in 2021 as well.

Francois Jurd de Girancourt, Head of the Banking Practice in Africa said: “The ROE recovery post COVID-19 is projected to be lower compared to pre-crisis levels, unless banks further improve their cost efficiency. African banks cost to asset ratio is 2.3 times higher than the global average and based on our estimates, banks would need to increase their operating efficiency by at least 25-30 percent to converge back to 2019 ROEs.”

Marie-Claude Nadeau, San Francisco-based McKinsey partner and report author said: “Banks will need to act quickly to return to precrisis ROE levels, in a far more challenging environment than the decade just past. The period of zero percent interest rates is being prolonged by the economic crisis and will reduce net interest margins, pushing incumbents to rethink their risk-intermediation-based business models. The trade-off between rebuilding capital and paying dividends will be stark, and deteriorating ratings of borrowers will lead to inflation of risk-weighted assets, which will tighten the squeeze.”

Mayowa Kuyoro,  a partner at McKinsey & Company in Lagos, Nigeria said: “In Nigeria, our analysis is that ROE levels are likely to recover by 2024, although they will remain low compared to pre-crisis levels. To proactively manage this, Nigerian banks will need to revisit and interrogate matters of efficiency and productivity to deliver services to more people at lower cost. The rapid shift to digital is clearing the way for banks to ramp up their use of data and analytics to enhance services and reduce costs. For banks that are existing market leaders, now is the time to consider investing in technology infrastructure and talent to expand beyond current customers and products. Equipping employees with the right skills and digital tools, doubling down on digital marketing, and establishing robust digital infrastructure are likely to be key enablers for success in the next normal.” 

For the long term, banks need to reset their agenda in ways that few expected nine months ago. McKinsey sets out three imperatives that will position banks well against the trends now taking shape.

  1. They must embed newfound speed and agility, identifying what worked well in their response to the crisis and finding ways to preserve those practices.
  2. They must fundamentally reinvent their business model to sustain a long winter of zero percent interest rates and economic challenges, while also adopting the best new ideas from digital challengers.
  3. And they must bring their broader purpose to the fore, especially environmental, social, and governance issues, and collaborate with the communities they serve to recast their contract with society.

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

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Falcon Corporation Secures N19.41bn Debt Facility for State-of-the-Art LPG Facility in Port Harcourt



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Falcon Corporation Limited, a prominent player in Nigeria’s energy sector, has successfully secured a N19.41 billion debt facility from the Chapel Hill Denham Nigeria-managed Infrastructure Debt Fund (NIDF).

The financing will be used for the development of a cutting-edge 15,000 metric ton Liquefied Petroleum Gas (LPG) storage facility and a dedicated jetty in Rumuolumeni, Saipem/Aker Base Road, Port Harcourt, Rivers State.

The Managing Director of Falcon Corporation, Prof. Joe Ezigbo, emphasized the company’s commitment to national service through investments in the gas industry.

He highlighted the strategic positioning of the LPG facility in proximity to major gas sources and navigable water routes, anticipating economic gains, job creation, income growth, health improvements, and environmental sustainability.

“We positioned our LPG facility strategically in proximity to major Gas sources and navigable water routes. The Project is set to facilitate and enhance more direct procurement and distribution of LPG, which will dramatically lower conventional delivery and storage costs,” said Prof. Joe Ezigbo.

The project has achieved significant milestones, reaching a completion rate of 65% as of October 2023. Various phases of development, including the completion of the jetty, shoreline protection, and engineering activities, have contributed to this progress.

The entire project is expected to be completed and commissioned by Q4 2024.

Falcon’s General Manager, Finance, Nelson Walter, expressed satisfaction with the partnership with NIDF, highlighting their reputation for providing reasonable terms for impactful infrastructure projects.

The flexible long-term loan repayment structure aligns with Falcon’s goals, making the collaboration instrumental in realizing this groundbreaking project.

Financial advisers Vetiva Capital Management Limited and Chapel Hill Denham Advisory, along with legal counsel Detail Commercial Solicitors, played crucial roles in facilitating this strategic debt facility for Falcon Corporation’s ambitious LPG infrastructure development in Rivers State.

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Nigerian Financial Market Sees Vibrant Trading Amidst N90bn Loss



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The Nigerian financial market showcased robust trading activities, dominated by the financial services sector.

Despite this upbeat activity, investors witnessed a net loss of N90 billion by the close of trading.

The financial services industry took the lead in trading, accounting for 67.68% of the total equity turnover volume and 47.30% of the value.

A total of 1.721 billion shares valued at N18.28 billion exchanged hands in 17,151 deals.

The conglomerates industry followed suit with 200.584 million shares worth N1.55 billion traded in 2,073 deals.

The services industry claimed the third position, boasting a turnover of 122.025 million shares valued at N376.17 million in 2,051 deals.

Despite the overall market capitalization dipping by 0.23% to N39.082 trillion due to the delisting of Union Bank of Nigeria’s entire issued share capital, the NGX All-Share Index experienced a 0.27% increase, closing the week at 71,419.87.

Additionally, McNichols Consolidated Plc contributed to the market dynamics by listing 398,053,129 ordinary shares at N0.50 arising from its rights issue.

The total issued and fully paid up shares of McNichols expanded from 718,740,000 to 1,116,793,129 ordinary shares.

The trading landscape witnessed a significant surge, with a 4.88% increase in total traded volume, reaching 2.54 billion units in weekly deals.

The number of trades grew by 8.75%, totaling 36,138, and the weekly traded value surged by 70.50%, amounting to N38.64 billion.

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Banking Sector

Zenith Bank Signs MOU With CFA Institute to Develop Finance and Investment Professionals



Zenith Bank Plc has signed a Memorandum of Understanding (MoU) with the Chartered Financial Analyst (CFA) Institute to promote efforts and activities that support the formation, training, and updating of human capital in finance and investment for the overall development of the Nigerian financial services sector. 

The MoU, was signed by the Group Managing Director/CEO of Zenith Bank Plc, Dr. Ebenezer Onyeagwu; the President/CEO of the CFA Institute, Margaret Franklin; and the President of CFA Society Nigeria, Ibukun Oyedeji on Tuesday, November 28, 2023.

Speaking at the MoU signing ceremony, the Group Managing Director/CEO of Zenith Bank Plc, Dr. Ebenezer Onyeagwu commended the CFA Institute and the CFA Society, Nigeria for their laudable programmes in developing finance and investment professionals in Nigeria.

According to him, your Women in Investment Management Initiative, CFA Institute Research Challenge, CFA Society Nigeria Ethics Challenge and University Affiliation Program are very laudable, and Zenith Bank will continue to partner with the CFA Institute and the CFA Society Nigeria to ensure that young finance and investment professionals get the needed support for their career development.

In his words, “As a good corporate citizen, Zenith Bank remains committed to furthering the economic, cultural and social development of the society. As such, we continue to support projects and initiatives that have long-term social and economic benefits for our various publics and stakeholders. Partnering with the CFA Institute and the CFA Society Nigeria is therefore a demonstration of our commitment to building professional excellence in the finance services industry in Nigeria”.

At the CFA Institute Africa Investment Conference, during the ‘Journey to the Top: A Discourse with CEOs’ segment, Dr. Onyeagwu inspired future finance and investment professionals to uphold the highest standards of integrity.

He stressed the importance of making difficult yet high-quality decisions, building robust networks, and dedicating themselves to hard work for career success.

In his words, “as upcoming professionals, the opportunities are immense for you. Africa doesn’t get bigger than Nigeria. There is scarcity of the right kind of people that have the talent, that have the character and the leadership to provide leadership in organizations. Make a decision to be one of those, make a decision to be different. You must be driven by your passion; you must delay gratification. In Zenith what is driving us is the strive for excellence. It is not about who you are and where you come from. We have the best class of talents you can think of anywhere in the world.”

He assured the young finance and investment professionals that Zenith Bank will offer immediate employment opportunity to CFA Charter Holders and those who qualify as Chartered Accountants.

Also speaking on the MoU, the President/CEO, CFA Institute, Margaret Franklin reiterated the Institute’s commitment to the professional development of students and upcoming professionals.

In her words, “there are many things that we do for students, we invest heavily in students and why is that? Because they are our future. The mission of the CFA Institute is to lead the investment industry with the highest standards of ethics, education and professional excellence for the ultimate benefit of society and that starts with our CFA programme”.

She commended Zenith Bank for its continued support to the CFA Society Nigeria and sponsorship of the CFA Institute Research Challenge over the years.

She also commended the bank for being one of the top employers of CFA members in the country. She expressed her admiration of the culture of excellence in Zenith Bank.

Also speaking at the MoU signing ceremony, the President of CFA Society Nigeria, Ibukun Oyedeji commended Zenith Bank for its partnership with CFA Society Nigeria and its commitment to the development of young finance professionals in the country.

The the CFA Institute Africa Investment Conference is being hosted by the CFA Institute and CFA Societies from Ghana, East Africa, South Africa and Mauritius. The conference has representatives from over 20 universities in Nigeria (members of their investment clubs being supported by CFA Society).


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