Analysts at Renaissance Capital Limited (RenCap) have predicted about 17 per cent credit growth this year.
The financial advisory firm made this prediction in a report titled: “Nigerian Bank: Still Growing Strong,” made available to THISDAY Monday.
RenCap pointed out that this could be achieved if lending to the power sector exceeds expectations, monetary policy becomes more accommodating and treasury and interbank yields fall to single digits.
“On the power sector, we understand the winning bidders for 15 of the 17 generation and distribution companies (Gencos and Discos) have submitted their bank guarantees that have subsequently been accepted by the Bureau of Public Enterprises (BPE).
“The winners are now in the process of finalising their loans from banks and concluding the purchase of their Genco and Disco assets. This bodes well for the disbursement of loans to begin in first half of 2013, although history suggests delays to the process cannot be fully discounted,” it argued.
RenCap maintained that the Tier-1 banks are best placed to fund the acquisition of the power assets given the size of their balance sheets
Commenting on the recent hike in the Asset Management Corporation of Nigeria’s (AMCON’s) Fund where the Central Bank of Nigeria (CBN) and commercial were expected to contribute 0.3 per cent of total assets to 0.5 per cent, the investment and research firm estimated that the upward represents about three to four per cent of banks’ total operating costs.
It added: “To simply stand still, banks will be required to offset this increase by an absolute decline in their other operating costs. In our view, few banks will be able to achieve a 100 per cent offset, resulting in some limited pressure on cost bases.
“There is no change to our view on impairments. Banks are benefiting from low impairment charges, with most reporting an annualised cost of risk below 0.70 per cent to nine month 2012. “
In terms of the share-price performance by commercial banks listed on the Nigerian Stock Exchange, RenCap pointed out that 2013 started strongly for banks.
“We project stronger Nigerian GDP growth of 7.1 per cent in 2013, from an estimated 6.6 per cent in 2012. We expect about 20 per cent increase in electric power supply in the country in 2012 to improve capacity utilisation, and the increased surveillance of oil-producing fields to help improve production in 2013. “We expect some moderation in inflation to 10-11 per cent in 2013, which could result in a 100 basis points, cut in Monetary Policy Rate to 11 per cent.
“However, in our view, the Cash Reserve Ratio is likely to be maintained at 12 per cent which could continue to hold back loan growth,” it stated.