By Oliver Abah, Senior Analyst TheG&BJournal
TUE, MARCH 12 2019-theG&BJournal-Coronation Merchant Bank Limited has capitulated to a decline in yields that deal a blow on profitability while the bank maintained zero non-performing loan assets.
For the year ended December 2018, Coronation Merchant Bank’s net income fell by 3.78 percent to N4.57 billion compared to N4.75 billion the previous year.
The decline in profit was due to ebbing interest income on short term government securities, albeit growth in on interest revenue added impetus to revenue.
For instance interest income at amortized costs increased at a mere 1.90 percent to N16.61 billion as at December 2018, while interest expense spiked by moved by 19.92 percent to N17.077 billion in the period under review.
Furthermore, net interest margin moved to 5.10 percent in December 2018 from 7.70 percent as at December.
Lenders in Africa’s largest economy have seen earnings grow at a slow pace signalling an end of free money as yields on short term government securities witnessed a precipitous drop in the most part of 2018.
“Earning assets grew significantly by 70 percent y/y to cushion the huge gap from reduced market-driven decline in yield. This resulted to a slight decline in net interest income by 5% to achieve N7.6bn (2017: N8.0bn),” said Abu Jimoh, Group Managing Director/CEO of Coronation Merchant Bank.
The Bank’s return on equity (ROE) fell to 15.01 percent in the period under review as against 17.17 percent as at December 2017.
However, a 31 percent increase in fees and commission income to N2.16 billion and an 84.48 percent increase in net gains on investment securities added impetus to revenue.
Coronation Merchant Bank’s total operating expenses were up 9.70 percent to N6.22 billion in December 2018 from N5.67 billion the previous year.
Due to rising operating expenses, cost to income ratio increased to 53.50 percent in December 2018 as against 52.60 percent as at December 2017.
“As a Group, we have continued to expand our sector reach and meet our customers’ financing needs by offering products tailor made to their varied needs,” said Jimoh.
“In 2018, we deliberately increased our exposures to high quality obligors in Agriculture, Manufacturing and Oil & Gas sectors who fall within our risk acceptance criteria. The quality and efficacy of our growth strategy is evidenced by our zero NPL ratios which we have maintained for the third year running,” said Jimoh.
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