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NIGERIA’S BANKING INDUSTRY
Abii-Ndoh, Godwin Tunmise
CONTENTS
Industry Outlook
SWOT Analysis
Growth Drivers and Influencing Factors
Player Positions
Porter’s Five Forces
Products and Services
Economic Features
Industry Overview
INDUSTRY OVERVIEW
Commercial Banks
Merchant Banks
Micro-finance Banks
Non-interest Bank
Primary Mortgage Banks
The African Banking Corporation and First Bank of Nigeria(which was
formerly known as the Bank of British West Africa (BBWA) were established.
Between 1892 and 1894
The indigenous banking boom of
the 1930's and 1940's
The first banking
ordinance in 1952
Lyones Commission and Central
Bank introduced in
1959
First era of consolidation
between 1959-1969 as a result of
bank failures owing to illiquidity.
Currently, there are:
ECONOMIC FEATURES
760000000045%
940000000055%
Nigerian Population with Bank Accounts
Banked PopulationNon-banked Population 2010 2011 2012 2013 2014
-
5,000,000,000,000.00
10,000,000,000,000.00
15,000,000,000,000.00
20,000,000,000,000.00
25,000,000,000,000.00
Commercial Bank Deposits (NGN)
Demand Deposits Time and Savings DepositsForeign Currency Deposits Government Deposits
Commercial banks own N27.5trn in total assets, and N22.3trn in total deposits as at 31st Dec, 2014
EPPAN estimates that only 76 million Nigerians have bank accounts
2010 2011 2012 2013 20140%
10%
20%
30%
40%
50%
60%
70%
Key Financial Ratios
Loans to Deposits Ratio Liquidity Ratio
Zenith Bank and GTBank’s post tax profits grew 4.3% and 10% respectively at the end of 2014 to
N99.45bn and N98.69bn, from N95.31bn and N90.02bn in 2013
Others
Portfolio Management
Tenored Deposits
FX Forward Contracts
PRODUCTS AND SERVICES
International Trade Finance
Visible Transactions
Letters of Credit
Form M
Custom Duties Collection
Invisible Transactions
Bills for Collection
Confirmed and Unconfirmed LC
Shipping Documents Endorsements
Short and Long Term Finance
Overdraft
Time/Term Loans
Bankers Acceptances
Loans, Bonds and Guarantees
Leases
PORTER’S FIVE FORCESRivalry among CompetitorsHigh number of players, low
switching costs, undifferentiated services
Bargaining Power of Buyers Large number of players, low
switching costs, undifferentiated services, full information about the
market
Threat of New EntrantsRegulation, distribution
considerations, market growth, brand identity
Threat of SubstitutesVery high, new substitutes include credit unions and
investment houses
Bargaining Power of Suppliers
Few alternatives, CBN rules and regulations, suppliers
are not concentrated, forward integration
PLAYER POSITIONS (2014)Bank Earnings Total
AssetsCustomer Deposits
Profits before Tax
ROA MRK Share (Assets)
MRK Share (deposits)
FirstBank N410.6bn N4,131.6bn N2,989.7bn N94.4bn 2.05% 15% 13.5%Zenith N403.3bn N3,755.2bn N2,537.3bn N119.7 2.74% 13.9% 11.2%UBA N290bn N2,762.5bn N2,169.6bn N56.2bn 1.64% 10.2% 9.9%GTBank N278.5bn N2,335.8bn N1,618.2bn N116.4bn 4.2% 8.4% 7.2%Access N245.1bn N2,104.3bn N1,454.4bn N52bn 2% 7.6% 6.7%
Tier 1 Banks
Bank Earnings Total Assets
Customer Deposits
Profits before Tax
ROA MRK Share (Assets)
MRK Share (deposits)
Diamond N208.4bn N1,933.1bn N1,493.1bn N28.1bn 1.3% 6.9% 6.7%
Ecobank N221.3bn N1,772.9bn N1,251bn N28.7bn 1.4% 6.5% 5.8%
Skye N136.7bn N1,421.1bn N952.3bn N10.4bn 1% 5.1% 4%
Fidelity N132.4bn N1,187bn N820bn N15.5bn 1.2% 4.4% 3.6%
FCMB N148.6bn N1,169.4bn N733.8bn N23.9bn 1.9% 4% 3.1%
Tier 2 Banks
PLAYER POSITIONS (2014)
Earnings Total Assets Customer Deposits0
2000
4000
6000
8000
10000
12000
14000
16000
Tier 1 vs Tier 2 Commercial Banks (Nbillion)
Tier 1 banks Tier 2 Banks (Top 5)
Market Share (Deposits)
Tier 1 banks
Tier 2 Banks (Top 5)
Others
Market Share (Assets)
Tier 1 banks
Tier 2 Banks (Top 5)
Others
The total Industry Herfindahl-Hirschman Index (HHI) at the end of 2014 was estimated to be 786.66 and 750.91 for assets and deposits respectively. This points to a fairly
competitive industry.
GROWTH DRIVERS AND INFLUENCING FACTORS
Widening Bank’s Lending Scope
Increased Customer Trust
Weak Financial Infrastructure
Sound Ethical Banking Practices
High Operating Costs
Legal Reforms and Improved Regulatory Framework
Security
Bank Consolidation
Stable Macroeconomic Environment
Robust Economic Growth
Effective Regulation and Supervision
Efficient Risk Management Practices
Technological Advancement
Influencing
Factors
Growth Drivers
SWOT ANALYSIS
WeaknessesInadequate deposit mobilisation efforts, high level of non-performing assets, high level of
financial exclusion, inadequate risk management practices, weak corporate
governance, poor and inadequate infrastructure, poor attitudes of employees
StrengthsImproved regulatory guidance, growth is relatively high
when compared to other emerging markets especially in Africa, increased access to mobile banking, growing
levels of confidence in the industry, healthy competition among banks
ThreatsThreat of instability of the financial system, liquidity
problems (TSA), bank failure, exchange rate volatility, interest
rate risks
OpportunitiesGlobalisation and access to foreign
financial markets, low levels of financial inclusion means more markets to tap
from, increased access to and use of new technologies
INDUSTRY OUTLOOKNigeria’s capital importation has reduced year on year from $2.67159bn to $2.66636bn
in 2015’s Q2 and is likely to continue to do so given the economy’s troubles. This is poised to continue to adversely affect the economy’s banking industry
Nigerian banks’ strong dependence on the domestic economy may prove detrimental given the economy’s recent sluggish state
Tier 1 capital ratios could fall below 15 per cent for banks at the end of 2015
Though already falling, regulatory capital adequacy ratios are likely to fall further due to lower earnings, weaker
asset quality and a limited ability to raise capital.
Fitch estimates that the industry’s non-performing loans will rise above the central bank informal cap of 5% but
below 10% of total sector loans by the end of2015
THANK YOU!