Nigerian banks are having a moment. Indeed, it is really an amazing time. Look at the market caps; GTBank* hit N1 trillion, joining Zenith Bank. Yet, the annual reporting season will come, and markets will begin to examine the intrinsic creditworthiness of these entities in the near term.
Our banks booked easy gains with the floating of Naira, picking more than 35% on their foreign currency assets. But that is not the only story. One will wait to see the long-term issuer default rating to ascertain their relative vulnerability to default due to foreign denominated loans.
Which bank has too much foreign currency denominated loan? Would there be conversations on capital adequacy ratio? But no confusion: any bank which has kept its foreign currency denominated loans low could experience one of the finest 6 months in Nigerian banking in terms of PROFIT. You will see record numbers – I mean records.
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Even the bank CEOs are buying shares like Ezioma bread and akara (the combos) offered every Sunday morning in Ovim [those good days when every kid had his/her loaf of bread, with peak milk, Lipton and akara to go]
Before you plan to relocate to Ovim, make sure you ask your bank to add more spaces in your bank account for the dividends which banks will pay. Yes, tons of money and investors are circling for those dividends because PROFITs will hit records. Yet, some of these banks are already under severe stress and downgrade is clearly possible; avoid those.
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