The Beginning of January 2016,is set to mark banks to stop the charge of Commission on Turnover (CoT), following a gradual phase that started in 2013.
The Banks will have to increase efforts to remain profitable and lend more to viable sectors of the economy. This follows the implementation of the Treasury Single Account (TSA) which has taken government funds out of the banks and the implementation of the zero Commission on Turnover (CoT) which will take effect from January 2016.
The CBN had in 2013 released the guidelines which gradually phased out CoT in the country. According to the guideline, CoT was reduced to N3 per N1,000 in 2013, N2 per N1,000 in 2014 and N1 per N1,000 this year, to be finally phased out by next year.
Some banks had continued to charge above the N1 per N1,000 turnover that was effective from January this year, while some others already have accounts with zero CoT. Revenue from CoT will now be shut down from January 2016.
Banking operations indicators also reflected the hard times being faced by Nigerian banks as the ratio of interest margin to gross income declined to 43.32 per cent in the period under review, from 51.2 per cent as at December 2014.
Also, the ratio of non-interest expenses to gross income and personnel expenses to non-interest expenses decreased by 10.8 and 0.1 per cent to 46.1 and 37.3 per cent at the end of June 2015 from 56.9 and 37.4 per cent at the end of December 2014, respectively. The decreases in these ratios reflected improvements in cost management measures by banks.
Following reports that three banks are distressed, the Central Bank of Nigeria has said that no bank in the country is distressed, even as Wema Bank, one of the banks that were under suspicion said its Capital Adequacy Ratio is way beyond the regulatory benchmark of 15 per cent for international banks.
Financial Stability Report for June 2015 released by the CBN recently had stated that three banks had Cash Adequacy Ratio (CAR) below five per cent, even as it said the three banks were not among the domestically systemic banks. It did not name the banks affected.
This had raised suspicion on some tier three banks particularly those in the process of raising funds. In a statement issued last week, the CBN stressed that “No Nigerian bank is experiencing stress”, assuring the banking public that the “Nigerian banking system is sound and all banks are in compliance with both the regulatory and prudential requirements.”
In a press statement, Wema Bank said based on its third quarter results, its CAR currently stands at 18.6 per cent, significantly higher than the 10 per cent CAR required for Regional and National Banks.
The bank which recently got the license to operate as a national bank said its shareholders’ funds stand at N44 billion, even as it plans to raise N19.7 billion in fresh capital to further boost its business in 2016.
It also plans to raise more funds through a combination of a Special Private placement and a possible rights issue to fund a nationwide rollout of branches, which it said would be phased.
“We will quickly open branches in locations where we already have existing infrastructure and captive business to ensure we take immediate advantage of the latent business opportunities in these locations. Subsequently, we will take a cautious approach to expansion and only deploy resources to areas that have been assessed as commercially viable”, the bank stated.
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