As the country witnessed persistent macroeconomic challenges, listed companies on the Nigerian Stock Exchange (NSE) have continued to warned investors on weak corporate earnings.
So far, seven of the listed companies have announced profit warning for the financial year ended December 2015 as market analysts predict more profit warnings are underway.
The latest to join investors warning is Skye Bank on the backdrop of management decision to recognize increased impairment on loans to sectors severely affected by the prevailing economic challenges which are yet to abate, especially Oil & Gas and Real Estate Sectors.
According to Skye Bank statement, “We remain committed to our focus on supporting the growth of the Retail and SME sectors amongst others. In 2015 we made substantial improvements to our risk management framework with a view to ensuring that our risk assets portfolio remains solid and of good quality.
“Our cost containment, internal efficiency and process improvement measures remain on track.”
According to findings, Skye Bank and four others Banks have warned investors of decline profit as they continued to make provision for impairment on loans to Oil & gas and commercial
This follows the likes of Ecobank Transnational Incorporated (ETI), Diamond Bank, First City Monument Bank and First Bank of Nigeria Holdings while Courteville and Computer Warehouse Group (CWG) in the Information Technology sector have also warned investors of decline profit.
CWG for the second time in one year has warned investors of decline profit and the impact has reduced the company’s share price.
Most banks have attributed the decline in profit to macroeconomic challenges, lower crude oil prices, depreciating currencies, monetary and fiscal bottlenecks, due to global developments, negatively impacted expected revenue growth.
Also, higher impairment losses on loans were recognised in the last quarter of 2015 across our loan portfolio at which key actions have been implemented to strengthen their credit risk management processes going forward.
Looking at some of the companies’ financial performance, for CWG has principally driven by significant exchange rate volatility. The exchange rate which had been largely stable within a narrow band suddenly plummeted and remained uncertain from the first quarter of 2015, following the significant drop in Oil prices.
Meanwhile, the continuing deterioration in Nigeria’s macro-economic conditions has resulted in Diamond Bank recognizing higher than expected impairment charges on loans made to the Energy and Commercial Business sectors.
While, the reduction in FBN Holdings profit is as a result of the recognition of impairment charges on some specific accounts resulting from a reassessment of the loan portfolio within its commercial banking business.
The bank had noted that , “This reassessment was driven by the challenging macro environment, coupled with fiscal and monetary headwinds which have resulted in a marked reduction in domestic output.”
Analysts have said investors need to be more guarded and learn to read between the lines before investing.
An analyst who pleaded anonymous said some of these companies might have genuine reasons while others are likely to utilize the current business challenges to mask gross inefficiencies and financial recklessness.
He said, “Not some of these companies are doing badly in stronger fundamentals and for years have failed to reward shareholders with dividend payment.
“We expect to see more companies warning investors of decline in profit. Investors however, should trade with caution and look at those companies that have maintained stronger growth in profit and dividend payout to its shareholders,” he added.
checks revealed that banks, which have released their corporate results for the full year ended December 23015 so far, increased their impairment charges for bad loans, a development financial analysts said is principle in prudent loan management.
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