Toluyoko: May 2013

Saturday 25 May 2013

Why GTBank, Zenith Outperformed First Bank, UBA

24 May 2013

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GTB office

Obinna Chima

The holding company (HoldCo) structure adopted by First Bank of Nigeria Limited and large number of African subsidiaries owned by the United Bank for Africa Plc (UBA) have been identified as likely factors that made their major competitors -Guaranty Trust Bank Plc (GTBank) and Zenith Bank Plc to record higher earnings in 2012.

While First Bank had adopted a HoldCo structure whereby a non-operating company holds the investments in the bank and each non-core banking operations as subsidiaries, in line with the Central Bank of Nigeria (CBN) new banking model, UBA got approval to operate as a standalone commercial bank. Therefore, it divested from its non-core banking businesses. But, UBA’s 18 African subsidiaries are still under the commercial bank.

However, GTBank and Zenith Bank are not operating under the HoldCo arrangement and have very fewer subsidiaries outside Nigeria. Specifically, while GTBank has a total of five branches outside the country, Zenith Bank has only three.

For instance, UBA’s profit before tax stood at N52.01 billion as at December 31, 2012, compared with a loss of N26.6 billion in 2011. Similarly, UBA recorded a profit after tax in 2012 of N54.77 billion as against a loss of N6.80billion the previous year.

Also, First Bank Nigeria Limited’s 2012 financial reports also showed that its profit before tax increased to N86.177 billion, from the N39.166 billion achieved in 2011. Also, the bank’s profit after tax stood at N75.097 billion as at December 2012, as against the N18.637 billion recorded in 2011.

But GTBank’s profit before tax jumped to N103 billion as at December 2012 from N62.080 billion in 2011, its profit after tax also increased to N87.296 billion in 2012, from N51.742 billion. Similarly, Zenith Bank recorded profit before tax of N102.100 billion in 2012, from N67.440 billion in 2011 as well as profit after tax of N100.68 billion in 2012.

The Renaissance Capital (RenCap), a Lagos-based financial advisory and research firm, in its latest report titled: “Battle of the Banking Giants - Who Delivered Value?” also showed that although overall, all banks showed improvement in their operational performance in 2012 as against their 2011 full year reports, their underlying earnings drivers varied significantly. It revealed that GTBank had the most favourable mix and hence delivered the highest returns on both a return on assets (RoA) and return on equity (RoE) basis.

“Over the past nine years, GTBank has consistently delivered higher average gross yields on the book at 10.7 per cent versus First Bank at 9.8 per cent and Zenith Bank at 9.7 per cent. We see no immediate reason why this would change – given its market share.

“Compared with full year 2011, GTBank saw the least deterioration with funding costs up 40 basis points versus First Bank up 70 basis points and Zenith Bank up 130 basis points. We are somewhat confused by the greater deterioration in Zenith’s margins given that there was hardly any change in the mix of the deposit book – we would have expected the bank to have fared better,” RenCap explained.

The Chief Financial Officer, UBA, Mr. Ugochukwu Nwaghodoh, recently disclosed plans by the bank to increase the level of income from its African subsidiaries to 40 percent in the next two to three years from 20 per cent last year.

According to him, the bank might open a subsidiary in Angola this year if granted approval by regulators in the country.

“Otherwise we don’t plan any other offshore expansion in the short to medium term,” he had said.

Monday 20 May 2013

Austerity, blame The Bank

Are Europe’s problems being caused by austerity or by a broken banking sector?

The consensus view is that fiscal belt-tightening has caused domestic demand to collapse across the euro zone’s most troubled countries, but some dissenters, notably fund manager and blogger Pawelmorski.com, suggest that banks are the bigger culprit.

For, however hard the European Central Bank tries to pump money into the economy, not a lot of credit is getting through to small firms and households in struggling countries. Whereas U.S. credit to the business sector grew in 2011 and has been expanding since, the story has been one of contraction across the euro zone’s edges.

Perhaps that shouldn’t be a surprise. Euro-zone banks are struggling. Whereas the U.S. banking sector had tier-one capital of 12.6% and non-performing loans running at 17.6% of capital at the end of 2011 (and both are likely to have improved since), the most recent numbers for Greece are 9.2% and 162.9% respectively, for Spain they’re 9.6% and 33.8% and for Portugal they’re 11.3% and 38.6%, according to the International Monetary Fund.

In short, banks in struggling Europe are undercapitalized and laden with bad debts. No wonder they’re not lending.

What can the ECB do?

Its liquidity provision has staved off wholesale bank collapses, but hasn’t done much for the underlying economies. It is now looking towards the U.K.’s Funding for Lending scheme–where banks are subsidized for handing loans out to households and small firms–for inspiration.

Unfortunately, if the ECB accepts these loans as collateral at discounts at which banks are happy to provide them to the market, it sets itself up for losses, which the Germans won’t be happy about, argues Tyler Cowen, an economist at George Mason University, blogging at Marginal Revolution. Austerity has certainly caused problems, but it’s not the only source of the euro zone’s weakness. A crippled banking sector is another. There are political moves afoot to soften austerity among Europe’s most struggling countries. But there’s a long way to go before the banking problem’s solved.

Friday 17 May 2013

How to Become A Great Leader

How do you become a great leader? Through successes and mistakes, and by staying true to your "four cornerstones.

MAY 17, 2013

John Quincy Adams once said, “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.”

His quote, along with tens of thousands of other great quotes on leadership, inspired me to find out more about what defines great leaders and to answer the age-old question of whether they are born or made. I have come to believe that the only innate elements of great leadership are passion and energy. Everything else can be taught.

Great leadership doesn’t happen overnight. There’s no 6-week course that will suddenly turn you into George Washington or Jack Welch. Great leadership is built brick by brick over many years with each decision and every mistake you make. Done correctly, great leadership stands on a rock solid foundation.

Within that foundation are four cornerstones. These are the four words that best describe the type of leader you are today. They also represent the type of person and leader you aspire to become. Some cornerstone examples include: Integrity, Gratitude, Decency, Vision and Character. The words are the core of what you stand for as a person and a leader.

Character. The mental and moral qualities distinctive to an individual. When you hear someone described as a “person of character,” you get a positive, leadership image.
Credibility. The capability of being trusted. As a small-business owner, credibility is a critical element to success. You will lead your company through sometimes murky waters while dealing with larger companies who may hesitate in doing business with a small company whose leader doesn’t possess the utmost credibility. Remember these words: “I can’t do business with you if I can’t trust you.”
Integrity. Having strong moral principles. This goes hand in hand with credibility and character. There are times in our business lives when we’ve been offered opportunities that were less than honest. The result may be a leg up on the competition or an easier path. In essence, it’s nothing more than a cornerstone test. We’ve all seen the disgraced leaders in newspapers and on television who failed the cornerstone test. Remember their faces, tears and shame. It’s all a result of a poorly built foundation.
Vision. Seeing what others cannot see. I’ve always aspired to be a person who challenges himself to see what others cannot see. This cornerstone is critical in times of crisis when there is no clear path.

Filling in the Foundation

Once you’ve established your four cornerstones, it’s time to fill in the foundation. Select 15 to 20 more words that describe your personal and leadership skills (e.g., excellence, respect, humility and responsibility). Lay these words across your foundation, let them settle in and stay committed to them.

Bill Gates Retakes World’s Richest Title From Carlos Slim

Bill Gates

(Bloomberg)

The 57-year-old co-founder of Redmond, Washington-based Microsoft Corp. (MSFT) recaptured the title from Mexican investor Carlos Slim Thursday, according to the Bloomberg Billionaires Index, as the software maker hit a five-year high. It is the first time Gates has held the mantle since 2007. His fortune is valued at $72.7 billion, up 16 percent year-to-date.

Slim’s America Movil (AMXL) SAB, the largest mobile-phone operator in the Americas, has dropped 14 percent this year after Mexico’s Congress passed a bill that could quash the billionaire’s market dominance. That’s helped erase more than $3 billion from the 73-year-old tycoon’s net worth, reports Bloomberg.

“When they’re talking about reform in a country that’s generally poor, and the guy shows up No. 1 on the list -- not a good thing,” said Greg Lesko, managing director at New York-based Deltec Asset Management LLC, which oversees $750 million and has an “underweight” position in Slim’s flagship company. “He’s had a pretty good monopoly situation in Mexico, and the Mexican cellphone user has been paying more than he should. We applaud it for the country.”

Inflation Rate in Nigeria Rose to 9.1% in April

The rate of inflation in the country rose to 9.1 per cent in April from 8.6 per cent in March, according to the Consumer Price Index Report released by the National Bureau of Statistics on Thursday.

The report attributed the rise in inflation to “higher price levels of food products due to the effect of declining inventories.”

The inflation rate fell below 10 per cent in January, meeting the Central Bank of Nigeria’s target, as the impact of last year’s higher fuel prices waned.

The CBN Governor, Mr. Lamido Sanusi, had said in March that consumer prices would probably remain between nine per cent and 11 per cent this year.

The NBS also said in the Gross Domestic Product Report for the first quarter of 2013 that the economy expanded by 6.56 in the period.

The report, which was signed by the Statistician-General for the Federation, Dr. Yemi Kale, stated that on aggregate basis, the figure represented an improvement over the 6.34 per cent recorded in the corresponding quarter of 2012.

According to the report, the nominal GDP for the first quarter of 2013 was estimated at N9.493tn as against the N9.142tn recorded during the corresponding quarter of 2012.

“On an aggregate basis, the economy, when measured by the real terms GDP, grew by 6.56 per cent in the first quarter of 2013 as against 6.34 per cent in the corresponding quarter of 2012, and 6.99 per cent in the fourth quarter of 2012,” the report stated.

It said the non-oil sector continued to be the major driver of the economy in the first quarter of this year when compared with the corresponding quarter in 2012.

“The sector recorded 7.89 per cent growth in real terms in the first quarter of 2013 compared with 8.14 per cent in the corresponding period of 2012. The growth in the non-oil sector, however, declined in the first quarter of 2013 when compared with the corresponding quarter of 2012,” it stated.

Within the two broad sectors of the economy, the report stated that the growth in the non-oil sector was driven by activities such as building and construction, hotels and restaurants, agriculture, real estate services, manufacturing, finance and insurance, and solid minerals, among others.

In terms of output, the real agricultural GDP growth in the first quarter of 2013 stood at 4.14 per cent.

Wholesale and retail trade had a growth rate of 8.22 per cent; telecommunications, 24.53 per cent; real estate, 10.26 per cent; manufacturing, 8.41 per cent; business and other services, 8.63 per cent; and finance and insurance, 3.61 per cent,

However, the NBS report stated that output in the oil sector decreased in the first quarter of 2013 relative to the corresponding quarter of 2012.

It said, “During the period under review, the Nigerian oil sector witnessed some levels of disruptions as a result of pipeline vandalism and bunkering incidents, with some oil companies such as Eni (Agip) declaring force majeure during the quarter.

“However, the sector also benefited immensely from the relative stability in international crude oil market price and the exchange rate of naira against the dollar.

“The oil sector contributed about 14.75 per cent to real GDP in the first quarter 2013, compared to the contribution in the first quarter of 2012, which was recorded at 15.80 per cent, and 12.59 per cent in the fourth quarter of 2012.”

[Punch]

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Thursday 16 May 2013

Fashola Envision Self-Dependent, Middle Class

Fashola Envisions Self-Dependent, Middle Class as Artisans Graduate

17 May 2013

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Lagos State Governor, Mr. Babatunde Fashola (SAN)

The Lagos State Governor, Mr. Babatunde Fashola (SAN), Thursday attended the grand finale of the fourth Tradesmen and Artisans’ Week and Graduation ceremony for re-trained artisans, stating that with the partnership forged by the state with artisans and tradesmen, he foresees a new middle class that is capable of generating employment and creating wealth.

The governor, who spoke at the Blue Roof Hall at the LTV8 premises, Agidingbi, added that the middle class he sees is different from the ones everyone knew in the 70s that was the middle class that wore suits and ties and were paid employees.

“This middle class doesn’t wear suit and ties but is the master of its own destiny. It is the employers and the owners of its own business. It is technology inclined. It has a cell phone and now hires its own corporate identity and corporate cards to formalise its own business.

“Those who doubt the capacity of what you can do should simply watch you take over the Nigerian economy. If we talk about an expected six to seven per cent growth in the African economy and in the Nigerian economy and it does not provide an opportunity for tradesmen and artisans and skilled people to fulfil their destiny and realise their dreams that economy has not performed,” the governor declared.

Fashola said he was glad to partner with the tradesmen and artisans to show that the Lagos economy is working because it is putting food on the table of artisans, adding that their challenges and problems would also be that of the state government.

He explained that the initiative to start the annual skill and entrepreneurship capacity training programme for the artisans was started to put them in the forefront of the business type that they chose.

“Our role would be to organise you and to educate and to support you so this skill training programme would continue. I have approved the training for another 1000 and as we go on we would measure the productivity back into the economy. But it is not enough for you to be trained but you must now become the trainers of the next generation,” he said.

With examples from other climes on how technicians like vulcanizers work in designated locations and not on the roads, the governor also charged Nigerians to stop defending bad business models and adopt better business models that give a win-win situation.

The adoption of better models, he said, would be the first step to bringing about dignity into the business that the artisans do.

“The Nigerian economy is changing. Those who know the history of these economy will tell you so but as it is changing, it is getting bigger as those who don’t want to change are being left behind and this economy is increasingly having very little room for those who are just out there to go and depend but it is creating a lot of room for those who are ready to do things with their hands and creating a lot of room for those who are ready to think.”