Banks Urged to Develop New Sources of Revenue

As earnings-constraining regulations continue to eat deep into deposit money banks’ (DMBs’) traditional sources of revenue, the financial institutions have been advised to look for new sources of revenue in order to continue to play their intermediary role in the system.

Managing Director, IBFC Alliance Consulting, Mr. Funmi Agusto stated this in a chat with THISDAY, on the sidelines of a seminar organised by his firm in Lagos.

 Agusto, who expressed optimism that the banking industry would continue to grow because of opportunities and the size of the Nigerian economy, however maintained that developing new sources of revenue would enable banks to partly offset the revenue that would be lost from policies such as the gradual removal of commission on turnover (CoT), among others.“In the next five years, we believe that the banking industry would grow. In the next five years, we believe that the industry would need to

Banks largely exposed to energy sector, says Afrinvest

The concentration of loan portfolio in the banking industry in few sectors poses systemic risk for the economy, according to Afrinvest, a foremost investment banking firm, which released a report on the Nigerian banking sector yesterday.

Looking at the loan portfolio of the industry, the report shows that there is a huge concentration of risk based in the power sector and the oil and gas sector, meaning that the increase in lending does not cut across all sectors of the economy.

Total loans to the power sector in 2013 was about $1.3bn for Discos and $1.7bn for Gencos. Additionally, it is expected that $5.8bn would be the loan figure for FY 2014 to the power sector.

The Afrinvest report further points to the increase in the balance sheet of the CBN from $11.4bn in 2011 to $19.2bn in 2013; with the significant increase coming from AMCON bonds.

This implies that the CBN would be unable to afford a bailout should there be another banking crisis if power sector firms are unable to service their loans

The report shows that