By Babajide Komolafe
LAGOS — Nigeria Deposit Insurance Corporation, NDIC, yesterday, said only five banks met the criteria to be categorized as sound banks in 2011. The corporation said this in its annual report for 2011 released yesterday.
The report showed that banking industry is still dominated by five banks. The five banks control 52.67 per cent of the total assets of all the banks.
The report also showed that the 20 banks in the country recorded cumulative lose of N8.71 billion and suffered assets mismatch.
Weak corporate governance
Meanwhile, in spite of the banking reforms implemented by the Central Bank ofNigeria, CBN, since 2009, there were still problems of extreme weaknesses in corporate governance and weak credit administration in the banks.
The report stated: “The deposit money banks (DMBs) are usually categorized into five levels of soundness, namely: A-Very Sound; B-Sound; C-Satisfactory; D-Marginal, and E-Unsound. The banking industry performance and level of soundness during the year ended December 31, 2011 indicated that five banks were in Category B, 13 banks in Category C and two banks were in Category D. There were no banks in Categories A & E as at December 31, 2011. The combined total assets of the two banks in Category D stood at N560.02 billion or 3.07 per cent of the industry total assets.
Industry total assets
“As in previous years, the oligopolistic tendencies remained in the industry as assets were concentrated among the larger banks. Out of the total assets (excluding Off Balance Sheet,OBS) of N18.20 trillion as at end of December 2011, the assets of the top five DMBs amounted to N9.59 trillion representing 52.67 per cent of the total assets of all the banks compared to its level of N7.47 trillion or 48.26 per cent of the total assets of the industry in 2010.
The table also showed that “the assets of the top 10 DMBs stood at N14.17 trillion, representing 77.83 per cent of the total assets of the industry as at the end of December 2011 compared to N11.01 trillion, representing 71.08 per cent in 2010. The remaining 10 banks had assets to the tune of N4.03 trillion, which represented 22.17 per cent of total assets as at the end of December 2011 as against N4.48 trillion, representing 22.17 of total industry assets in 2010.
“Total operating income of the industry stood at N2.33 trillion in 2011, representing an increase of 7.90 per cent over the N2.16 trillion reported in 2010. Similarly, total operating expenses increased from N932.53 billion in December 2010 to N1.79 trillion in December 2011.
Consequently, the industry recorded a loss of N6.71 billion in December 2011 as against a profit of N607.34 billion recorded in December 2010.
A total of nine banks reported losses at the end of 2011 which resulted in the negative Return on Assets (ROA) as well as Return on Equity (ROE) and adversely affected the industry performance during the period under review. The Yield on Earning Assets also dropped to 10.05 per cent as at December, 2011 from 11.24 per cent as at December 2010.”
Funding long investment maturity
The NDIC report indicated that banks were using deposits (assets) with short term maturity to fund long investment maturity.
It said: “The maturity profile of the industry’s assets and liabilities showed a cumulative mismatch. The mismatch was recorded for all the maturity bands except those maturing after 365 days. That implied that short-term funds were used to fund long term investments. Out of total deposits of N12.33 trillion, the sum of N9.48 trillion or 76.86 per cent would mature in 30days, N1.52 trillion or 12.37 per cent had maturity of between 31 to 90 days while the remaining N1.33 trillion or 10.79 per cent would mature after 91 days.
“The banking industry liquidity position was strong in 2011 as the average liquidity ratio rose from 51.77 per cent in December 2010 to 65.69 per cent in December 2011. All the DMBs met the minimum liquidity ratio requirement of 30 per cent as at the end of December 2011.”