CBN Policy May Dent Banks’ Earnings

cbn_buildingFitch Rating Limited, a global rating agency,  has said that they expect new limits on bank charges imposed by the Central Bank of Nigeria  (CBN) to dent what have been highly profitable fees and commissions, particularly for those with large retail franchises.

Monetary policy continues to be tight with the the apexl bank last week raising the cash reserve requirement on public sector deposits.

BusinessWorld  Intelligence recalls that the apex bank recently introduced a 50 per cent cash reserve requirement on public sector funds after warning of the risk of excess liquidity in the banking system. The regulation, which applies to about N1.3 trillion ($8.1 billion) of deposits, could result in N500 billion of liquidity being withdrawn, Fitch said.

Fitch said lower treasury bill yields this year may weaken interest income. An increase in the annual levy paid by the country’s banks to fund the Asset Management Corporation of Nigeria (Amcon), which the government set up in 2010 to buy lenders’ bad debts, may boots cost-to-income ratios, the ratings company said. The charge was raised to 0.5 per cent of bank assets, from 0.3 per cent.

The Nigerian Stock Exchange (NSE) Banking 10 Index, which tracks the 10 largest lenders by market value, has advanced 19 per cent this year, trailing the 35 per cent increase of the Nigerian Stock Exchange All-Share Index.

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