A banking analyst at Vetiva Research has expressed concerns that the new Payment Service Bank (PSB) licences issued by the Central Bank of Nigeria (CBN) to MTN Nigeria and Airtel posed a threat to some income streams of existing banks in 2022.
Giving projections for the new year, Vetiva said the new PSBs will take away a significant share of transaction fees from existing banks and potentially lower their revaluation gains.
The analyst noted that interest rates are poised to recover slowly, while inflationary pressures will remain high.
The National Bureau of Statistics (NBS) yesterday disclosed that the inflation rate closed December 2021 at 15.63 per cent from 16.47 per cent in January 2021.
In its 2022 Outlook titled “Running scared”, Vetiva Research projected that the headwinds observed in the banking sector in 2021 will start to ease.
The Banking Analyst at Vetiva, Joshua Odebisi in a statement reported by Thisday said: “We expect interest rates to remain in a steady upward trajectory, as government borrowing continues to rise to fund an ever-expanding deficit.
“However, we do expect inflation to continue to outpace this rise, meaning negative real returns for investors in the market.
“Furthermore, we do expect this to have an impact on interest income from investment securities, with the yield on interest-bearing assets likely to remain below 2019 levels for the near to medium term.”
The analyst also gave a modest outlook for loan growth in the coming year, with loans and advances projected to grow steadily, albeit at an unspectacular pace.
He mentioned that “banks’ focus will continue to shift towards Non-Interest Revenue growth, although headwinds pose a challenge to this strategy.”
Some of those headwinds mentioned were the lack of enthusiasm for the secondary Fixed Income market, low foreign exchange liquidity keeping international investors away, the possibility of the new PSBs taking away a significant share of transaction fees and potentially lower revaluation gains.
He highlighted some of the potential effects of the new Basel III regulations on the sector, from the need for some banks to raise additional capital, to the possibility of lower dividend payouts due to higher Tier-I capital requirements and the need for banks to hold more liquid assets going forward potentially impacting dividend payout rates in the coming years.
