Banks to experience low interest income in 2019

The Head Research at Coronation Merchant Bank (CMB), Guy Czartoryski has said that banks are unlikely to gain huge profits this year due to low demand for loans and poor economic growth.

Czartoryski who disclosed during the unveiling of CMB’s 2019 Macroeconomic Outlook, said the high yields on treasury bills will also drop after the 2019 general elections bid to hold next month.

“They are unlikely to experience much loan growth, given the weak economy and the fact that they can benefit from high treasury bills yields. On the other hand, bank stocks are cheap in historical terms. So, if interest rates come down later in the year and market conditions improve, then there could be a sharp rally in bank stocks later in the year”.

He explained that even regular bank customers that were borrowing excessively before, hardly come back for loans given the poor state of the economy.

If Czartoryski’s prediction fall through, banks like Stanbic Ibtc and UBA that had large profit roll in 2018, might not be that lucky this year.

Weak loan demand is one of the challenges facing banks and cutting their profitability, and one can say that banks are contributing to that.

The requirements for bank loans for most banks only favours income earners and self-employed individuals so unemployed and upcoming entrepreneurs are unlikely to have access to loans.

CMB was founded in 1993 as Associated Discount House Limited (ADHL) by a consortium of reputable financial institutions. ADHL was licensed by the Central Bank of Nigeria (CBN) to provide liquidity for sovereign debt notes and money market instruments. In 2013, it obtained a merchant banking license and an FX dealing license in 2015.

It recently had over 180 per cent in its issued commercial paper, which was its first ever commercial paper issue.