Kurfi Kasimu, the managing director and chief executive officer of APT Securities and Funds Limited, spoke with Kayoed Ogunwale, on banks earnings in 2018 and implications of CBN policy on dividend payment by banks amongst others. Excerpts:
Activities at the Nigerian stock market have been on the upward swing for a considerable period of time until a few weeks ago, what is your assessment of the current situation?
Stock market performance during the year 2017 was impressive; it gained about 44 percent ahead of all economic indices. If you look at treasury bills, federal government bonds, and even money market, in terms of return, the stock market did better. With that performance, January also closed with 15 percent gain, this has not been achieved for the last ve years. Some stocks gained as high as 100 percent and above in the last two months. at sudden, rise couple with the performance of the market in the year 2017 forced investors to take advantage of rise in stock prices, that mount more pressure on March activities. However, the trend may completely different before the end of this month, especially banking stocks and some blue-chip companies, which they may likely declare impressive results that will upturn market activities.
What impact do you think the new CBN dividend policy will have on the banking sector especially on loan books of banks?
For me, it is not a new policy, probably the way people perceived it. at policy has been there, as far back as 2014, and the banking sector knew about it. We had banks that declared pro t for the year ended 2016 but they couldn’t pay the dividend because of the existence of that policy. e policy makes it di cult for affected banks to pay dividend until they wipe o loses in their reserves. If you look at it, some banks have heavy losses in their reserves, therefore what can they do? Banks paid a generous dividend for the year ended 2016, most of the banks that paid the generous dividend are likely to repeat the same for the year ended 2017 because they are not affected by the CBN policy. The CBN policy is for the good of the banks and for the good of future shareholders because the bank must exist before it declares the dividend. The moment the bank cash liquidity is challenged, the existence of that bank is challenged and if there is no bank, there would be no shareholders talk less of giving the dividend.
To which extent has the introduction of TSA impacted on the deposit and liquidity in the financial institutions?
TSA came as far back as 2015, I believe it won’t make any difference to the banks because they have already experienced it in the last quarter of 2016. Today, most of the banks do not hold money that belongs to
the federal government. States and local governments funds are still with the banks. It means 40 to 45 percent of total allocation is still within the banking system, therefore is not a total loss. In addition to that, the banks were rewarded by treasury bills and treasury bills was trading as high as 21 percent last year, most of the banks declared huge pro t because they decided to buy treasury bills rather than lending. This gives them better returns without impairment, without incurring any loses because they stopped lending. To me, TSA will not have much effect on banks result for the year ended 2017 when they release their results.
Don’t you think banks investing in Treasury bills will have negative impact on the economy?
To some extent, it will have but I think the CBN may likely adjust the MPC policy and once it goes down, banks have no choice than to look somewhere else to make their money. is is the challenge most banks would face in 2018 and that is why some analysts predicted that banks in 2018 may not earn what they earned in 2017 except banks that go an extra mile.
How do you see retail investors’ performance in Nigeria?
So far so good, by the year ended 2017, retail investors have 52 percent ahead of institutional investors. What restored retail investors confidence back into the market is the good performance witnessed in 2017. e market closed with 44 percent gain, some stocks gained as high as 200 percent particularly the banking sector where the majority of retail investors have holdings. Some stocks attained their highest price ever. Stocks like GTB with N54, Nestle with N1,500 per share and many more. What this mean to the market is that life circle of retail investors are gradually coming back because some stocks are getting to their high price.
What is your view on the pro- posed MTN listing on the oor of the Nigerian Stock Exchange?
No doubt, the market is waiting for the listing. MTN opt to be listed in 2017 they latter move it to 2018. If MTN did not take advantage of market other companies are there to take it but I believe they will come this year as they promise. For so many years, we’ve not experienced primary is- sues, today many primary issues are ongoing and many of them are over subscribed. is shows that the mar- ket is ripe for the new companies for be listed. We are also expecting Airtel and Glo to get listed and other blues-chip companies may likely come for listing. Take for instance, in Ghana, there is policy stated that for telecom companies to go into 4G, it has to be listed, that make it com- pulsory for MTN to list in Ghana on its own because of existing policy. We are not only expecting MTN to be listed in Nigeria, we are also expect other telecom companies to be listed or else the federal government should learn from Ghana to make sure that certain privileges should only be restricted to public compa- nies that listed.
As a member of Investment Securities Tribunal (IST) board, what is your board doing to boost investors’ con dence in Nigeria?
Appointing board for Investment Securities Tribunal alone is enough to restore investors’ confidence because for two years there was no board, which mean there was no judgement from the tribunal. e board started delivering judgements late last year and more judgement are coming which I believe will bring back investors con dence into the market in totality because from time to time we release judgement with fearless. ere are many things on the ground that is improving inves- tors confidence in capital market aside from IST. Not only that, take for instance, CBN’s Investors & Ex- ports policy on foreign exchange is helping investors. It gives freedom to foreign investors to work into capital market and go out without restriction.