Nigeria’s equities dip further on weak interest income

Nigeria's equities market continues to face uncertainties as investors closely monitor the latest bank earnings amid a challenging economic environment. Moses Hammed, Investment Research Analyst at Investment One Financial Services, shared insights on the current state of the banking sector in a recent interview with CNBC Africa. Hammed highlighted the ongoing concerns surrounding the banking sector, attributing the volatility in banking stocks to the unpredictability of policies introduced by the Central Bank of Nigeria (CBN). He noted that frequent policy changes by the CBN have created a sense of unease among investors, leading to cautious trading in the market. While discussing the financial performance of banks, Hammed acknowledged some positive trends such as a reduction in non-performing loans and enhanced risk management practices. However, he emphasized the need for banks to remain vigilant, especially in light of increasing consumer loans being disbursed. One of the key challenges facing banks is the current low interest rate environment, which has put pressure on interest income. To counter this, banks are exploring ways to boost non-interest income, with a focus on fees and commissions. Despite efforts to diversify revenue streams, recent regulatory changes have presented additional hurdles for banks to navigate. The disparity between tier one and tier two banks was also discussed, with Hammed noting that larger banks have a comparative advantage due to their financial strength and resources. However, he highlighted that tier two banks have shown resilience by growing their loan portfolios and expanding their retail business. Looking ahead, the outlook for bank earnings remains uncertain, with interest income expected to remain subdued. The pressure on non-interest income, coupled with evolving regulatory requirements, poses challenges for banks as they strive to maintain profitability. In conclusion, the performance of Nigeria's equities market is intricately linked to developments in the banking sector. As investors await further clarity on policy direction and economic conditions, the path ahead for the market remains uncertain.