MONDAYBUSINESS 9mobile’s sale to be concluded in 6 months – Report

A recent report by Renaissance Capital research team has indicated that big-ticket loans and weakness in the risk management framework were the cause of pressure on the Non-Performing Loan (NPL) books of banks in the country.

Data from the CBN shows that sector NPLs are yet to peak, with the NPL ratio increasing to 15.2% in May 2017, from 13.6% in February 2017.

FBNH reported an NPL ratio of 22% in 1H17, down from 26% in FY16. Similarly, Ecobank Nigeria’s NPL ratio of 8.9% in 1H17 came in marginally lower than the 9.1% reported in FY16. FBNH’s major troubled loan, Atlantic Energy, represents 5% of its loan book.

The report also revealed that, banks that are more exposed to the retail and SME segments have been adversely affected.

Stanbic and FCMB have the highest exposure to the retail segment at 35% and 29%, respectively, and the highest NPL ratios (excluding FBNH) in the sector.

This is not surprising, according to the report, given that the retail segment and SME segments of the loan book was adversely affected by staff layoffs, FX scarcity and the impact of naira devaluation.

It states that one common trend in the 1H17 numbers was the Quarter on Quarter (QoQ) spike in impairment charges, driven by the telecommunications and transportation sectors and largely from two high profile names, Arik Air and 9Mobile (formerly Etisalat Nigeria).

“From our conversations with the banks, we understand that they have appointed two external advisors to drive the 9Mobile sale process, and a few international and local investors have expressed interest in acquiring the asset.

“The banks expect that the sale of 9Mobile will be concluded within the next six months. Nonetheless, they have not adopted a standardised approach in making provisions on this exposure, understandably so given differences in the type of exposure’’, the report stated.

GTBank and SIBTC’s exposure to 9Mobile are NGN42.0bn and NGN7.6bn, respectively (under a syndicated facility), and both have made collective provisions of 14% and 59% of their exposures, respectively. FBNH’s (NGN23.5bn) and UBA’s (NGN38.0bn) exposures are mostly fully secured under the syndicated facility, and they are comfortable with only making the prudential requirement provisions of 2% on performing loans.

In addition to its exposure in the syndicated loan, the report stated that Zenith has a portion of its exposure under an unsecured bilateral agreement, which is the reason for its 30% provision against its total NGN64-68bn exposure.

Access Bank has an exposure of NGN11bn under the syndicated facility, but also indirect exposures through contracts amounting to N3539bn. The bank has taken an NGN4bn collective provision on its exposure.

The research team said during its meetings with the banks, they tried to get a sense of what other exposures could be potential systemic risks. The banks think it is unlikely that we will see another big exposure become an NPL threat to the sector. “One bank expressed the view that “most of all the high risks names are down already”. Royal Exchange Plc, Nigeria’s premier insurance and financial services group, has announced that its Profit After Tax (PAT) increased by 19 per cent from N171.14 million achieved in half year 2016 to N203.3 million recorded in half year 2017.

The company also announced an increase in its Gross Written Premium (GWP) in the sum of N9.37 billion in the period under consideration, which represents an increase of 11 percent over the half year 2016 (H1’16), which stood at N8.43 billion.

The H1’17 Gross Premium Income witnessed a moderate growth of 6.3 percent over the H1’16 figures, at N6.86 billion for H1’17, compared to the N6.46 billion generated in the corresponding period in 2016.

Net Premium Income for the period amounted to N4.72 billion, representing a marginal growth of 2.5 percent over that of half year 2016, which stood at N4.60 billion. Total Net Claims paid for the period under review amounted to N1.76 billion, a decrease of 10 percent from half year 2016, which was N1.95 billion. This feat was achieved as a result of stringent underwriting policies implemented throughout the company in the period under review.

While speaking on the results, the Group Managing Director of Royal Exchange Plc, Alhaji Auwalu Muktari, said “By focusing on the growth objectives set forth at the beginning of the year, which included an increased focus on the retail and corporate markets, amongst others, we have been able to achieve moderate growth and the board and management of the company are definitely optimistic for the second half of the year.”

According to Alhaji Muktari, “The beginning of the 2017 financialyearwitnesseddifficulties in the Nigerian economy, but as evidenced by our stellar results and those of other firms in the Nigerian Stock Market, there is renewed optimism in the Nigerian economy.

“Royal Exchange Plc is hopeful that by focusing our efforts on aggressive sales of our various products and services, including strong presence and participation in the retail sales space and the continued optimization of our operating costs, we will be able to surpass our financial targets set for ourselves at the beginning of the year.”