Forced Increase in Interest on Savings Stagnates First Bank Performance * Shares Decline 4.7%, Compared with NSE ‘s 45% Growth in 1 Year

First Bank of Nigeria Plc, a subsidiary of FBN Holdings Plc (FBNH) said its financial performance for the year ended December 2013 may be stagnated following the Central Bank of Nigeria (CBN) directives that banks increase interest rates paid on savings.
It also said that the prospects for growth in performance was further hindered by a reduction in commission on sales.
These two factors put together alone, cost the bank N15 billion, according to a report by Bloomberg.
FBN Holdings Plc (FBNH), owner of First Bank Nigeria, said its profit for 2013 will probably be the same as the previous year as tougher regulatory requirements increased its costs.
A regulator-mandated rise in the interest rate paid on savings cost the bank N5 billion ($31.5 million) in the nine months through September, while a reduction in commission on sales led to a drop of about N10 billion, Bisi Onasanya, Group Managing Director and Chief Executive Offic said in Lagos. A sale of about N150 billion  in treasury bills, placed with the central bank at an interest rate of zero percent, also hurt the lender’s income, he said.
The increase in interest on savings “was something not budgeted for by the bank,” Onasanya said. “Barring any additional pronouncements by the government, we will be achieving our 2012 numbers.” FBN reported 2012 net income of N75.7 billion, more than triple the previous year.
The Central Bank of Nigeria increased the cash-reserve requirement for federal, state and local government deposits to 50 percent from 12 percent in July to reduce liquidity and support the naira. The regulator also told lenders to lower fees and commissions from April 2013 to prevent potential conflict with clients.
FBN’s profit declined by eight percent to N59.1 billion  in the nine months through September from N64.3 billion in the previous year, as cost of funds increased to 3.2 percent from 2.4 percent, the lender said in a December 31 filing to the Nigerian Stock Exchange.
The bank plans to increase its loan book by 10 percent to 15 percent in 2014 from five percent growth in the nine months through September to boost its income, Onasanya said. It’s also seeking an acquisition to expand into general insurance from life insurance, he said.
First Bank “has many deals in the pipeline including the divestment of Shell and Chevron assets,” Onasanya said. Oil and gas explorers Royal Dutch Shell Plc (RDSA) and U.S.-based Chevron Corp. are selling onshore and shallow-water assets amid persistent unrest and crude-oil theft in the Niger River delta.
Lenders in Africa’s second-biggest economy are returning to profitability after central bank Governor Lamido Sanusi approved a N620 billion  bank bailout in 2008 and 2009 as loans to equity speculators and fuel importers pushed the industry near collapse. The government then created the Asset Management Corp. of Nigeria to buy lenders’ bad debts.
FBN shares declined 0.1 percent to N16.29 at close of trading in Lagos. They have fallen 4.7 percent in the past year, compared with a 45 percent gain on the Nigerian Stock Exchange All Share Index.

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