|
Nigeria's New Wonder Banks - Cont'd
This has not happened. Interest rates are still double digit, companies are
still folding up, or reducing capacity utilization, construction sites are
silent, except bank building sites, the Lekki corridor is littered with finished
buildings with no takers. Nothing seems to have changed. More baffling still,
girls in mini skirts are still combing nooks and corners seeking deposits or
investments (on public offers). Why are the banks still seeking for deposits,
putting their staff under undue pressure when they are awash with cash? Why are
our mega banks still running promos to mobilize deposits? (open an account and
win lagbaja?).
What is driving the growth of the wonder banks? The answer is simple, the
capital market. The market boom of 2003 attracted everyone's attention. Some
stock values grew tenfold (eg Conoil). The gold rush was on. When the banks
needed N25 Billion to avoid the noose of CBN, it was logical to head to the
capital market, and to the capital market they went, and have been heading
since, again and again.
How do you know a bank is about to go to the market? It's share price starts
climbing sharply for no reason, breaking old records. Then it is placed on
technical suspension, and the bank comes out with a "discount". There has been
claims that banks mop up their shares from the market to pull this stunt. This
claim has gotten to the ears of the SEC, making it to issue a statement that it
will make sure this does not happen.
Whatever the case, the growth of the wonder banks have defied any economic
logic. Fears of dilution of earnnings due to increase in the number of issues
shares (due to endless trips to the capital market) has been proved unfounded by
the banks. The more the issued number of shares, the greater the earnings per
share, and dividends. The sicker the economy, the healthier the banks. The more
companies that go bankrupt and into recievership, the fatter the banks' bottom
line. These have become Nigeria's new wonder banks.
Is this modern wonder sustainable? This is the question on many minds. As banks
compete to be seen as the largest by how much funds they can absorb from the
market, how long will the cinderalla run last? How long will money make more
money without viable investment outlets? How long can these wonder banks outgrow
the economy? Only time will tell...
By NigeriaGalleria Editorial Team
December 2007
Continued from Page 1
Return to News and Commentary Index
|
