A FIRM of financial analysts, Proshare Nigeria, has said that Skye Bank Plc may experience reduction in its earnings for the 2015 financial year.
According to the firm, Skye Bank’s expensive acquisition of Mainstreet Bank and the high cost of integration of its IT platforms and processes would also drive up its operating expenses, as reflected in the bank’s high cost-to-income ratio, which was put at above 70 per cent as at the third quarter of 2015.
Besides, the financial analysts said the bank had noted in its profit warning that the growing bad loans in oil and gas and real estate sectors hit the bank’s operations considerably.
Proshare said deductions from recent audited reports of a few of the banks presented so far indicates that average turnover growth (as at April 12th2015) stood at 12 per cent and profit margin of 16 per cent with an attendant surge in impairment charges and bad loans.
In its publication entitled, “Why investors should expect contained earning in 2015 result” published on its website, Proshare said the effects of some government policies such as the public sector funds freeze will lead to loss of trading revenues for banks, among others.
“The bank will have to deal with its significant exposure to an elongated commodities price slump that has sparked defaults for it in the Oil & Gas, Power and Real Estate sector(s),” report published by the analysts said.
The financial analysts envisage that 26per cent of total loan portfolio of the bank in Q3’15 was in Oil and Gas while the same troubled sector owns 28 per cent of total non-performing loans (bad debts) as revealed in its Q3’15. It said the crash of price in oil market had made it significantly difficult for risk assets in the sector to perform.
“The challenge for the bank, as for virtually all the banks in this risk adjustment crisis must relate to how they treat/ recognise the underlying assets that collaterised both the loan and the cash flows thereon,” it said. The analysts also noted that the banking sector generally experienced a regime of high cost of funds in a distressed economy with the twin issues of loss of revenue from public sector funds, fines and integration costs on the one hand and a real estate market in a flux.

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