Industry watchers who were surprised that foreign exchange gains made it possible for some banks to defy the tough business environment and report increased profits in their third quarter 2016 results should brace for more surprises, as experts have predicted higher FX gains for the lenders in their full year 2016 results.
Head of Equity Research at FBNQuest, Olubunmi Asaolu, made this forecast while delivering a presentation on the markets at the recent investor conference organised by the firm. He stated that the strong earnings as well as Profit Before Tax (PBT) that banks reported for the last quarter were primarily attributable to FX gains, adding that the lenders are set to make higher FX gains in their full year 2016 financial results.
He, however, advised that while banking stocks were getting cheaper, it was imperative for investors to remain cautious when making their investment decisions.
Also speaking at the event, the Head of Macroeconomic and Fixed-Income Research at FBN Quest, Mr. Gregory Kronsten, noted that Nigeria faces a critical FX supply issue, as the buffer of reserves is currently “not great”. He said: “The challenge is how to bring about a large FX inflow, restore market confidence and secure the autonomous flows for a fully functional market.”
It will be recalled that four commercial banks- Zenith Bank Plc, Guaranty Trust Bank Plc, Access Bank Plc and Union Bank of Nigeria Plc- raked in total Profit after Tax of N290.111 billion in their third quarter 2016 results. GTB led the four banks with 59.56 per cent growth in profit after tax of N119.927 billion, representing a growth of 59.56 over N75.160 billion recorded in the corresponding period of June 2015.
Union Bank of Nigeria Plc (UBN) followed with 39.29 per cent growth in profit after tax from N9.34 billion in the corresponding quarter in 2015 to N13.01 billion, Also, Zenith Bank Plc’s third quarter 2016 profit after tax grew by 20.44 per cent to N100.074 billion during the third quarter, from N83.087 billion recorded a year earlier, while Access Bank’s Profit after tax (PAT) was up by 19 per cent from N48.1 billion in 2015 to N57.1 billion in 2016