Zenith, 3 Other Banks Generate N281bn From T-Bills, Bonds

Despite low-yield environment, four leading banks generated N281bn from investing in Treasury Bills and Federal Government bonds in a half year ended June 30, 2019 audited result and accounts.

This is an increase of 19.5 per cent from N235.4bn generated by the same four banks in the prior H1 2018 audited result and accounts released to the Nigerian Stock Exchange.

Our correspondent gathered that United Bank for Africa, followed by Zenith Bank plc continued to dominate the banking industry with investment in securities amidst the Central Bank of Nigeria’s move to reduce banks exposure to government securities.

Investment bankers, who spoke to our correspondent, said that the hike in Loan to Deposit that might lead to increase in Non-Performing Loans , coupled with decline on yield environment in FGN debt instruments, might weaken banks earnings this year.

Yields on fixed income securities continue to moderate in line with the apex bank’s desire for a low interest rate environment, with the average 91 days T-Bills dropping to 10.26 per cent in second quarter of 2019 from 12.39 per cent in first quarter of 2018.

Also, average 1-year T-bills yield dropped to 14.33 per cent in second quarter of 2019 from 15.76 per cent in second quarter of 2019.

Our correspondent can also report that income on investment securities contributed heavily to banks interest income in the period under review.

The breakdown revealed that UBA reported 11.1 per cent increase on interest income investing in securities to N87.7bn in H1 2019 from N78.9billion in H1 2018 while Access Bank Plc reported N61.14 billion interest income investing in securities, 118 per cent increase over N28.1 billion reported in H1 2018.

Guaranty Trust Bank Plc was the only bank with decline on interest income generated from investing in securities to N46.5bn, nine per cent below N51.1billion reported in prior half year results.

GTBank noted that earning asset yield declined by 101 basis points from 13.07 per cent in H1 2018 to 12.06 per cent in H1 2019 as a result of portfolio yield on T-Bills which average 15.6 per cent in h1 2019 as against 17.4 per cent in H1 2018 and reduction in yield on local currency risk assets from 16.8 per cent in H1 2018 to 16.1 per cent in H1 2019.

In addition, Zenith Bank plc reported 11.3 per cent increase on interest income generated from T-Bills and FGN Bonds to N85.9bn in H1 2019 from N77.29 billion reported in H1 2018.

The Monetary Policy Committee of the CBN had asked the management of the bank to limit access to government securities and increase lending to real sector.

The CBN Governor, Mr. Godwin Emefiele, who is also the chairman of the committee, had said, “In view of the abundant opportunities that available to banks for unfettered access to government securities which tend to crowd out private sector lending, the MPC called on management to provide a mechanism for limiting deposit money banks’ access to government securities so as to redirect banks’ lending focus to the private sector noting that this would spur the badly needed growth in the economy.