A tale of many bank ratings

It is sad that Nigeria as a Sovereign Nation allows its banks to pride themselves with "consistent AA Fitch Rating", "JJ Basel Ratings", "XX David Letterman Ratings" and all the associated garbage. Its therefore no surprise when some whimsical (or "respectable") organization decides to rate Nigerian Banks without having facts to do so. I ask where were all these rating agencies when Bank of America was going under? Where were all these rating agencies when Iceland as a country was going bankrupt? But of course because its Africa everyone gets to take a potshot at its banks. This mentality is pervasive in the west. Don't get me wrong i am sure there are problems with Nigerian banks there has to be room for Improvements but this is the job of the CBN. I hope the new Governor lives up to his nice words and improves upon the work of Soludo. There is a saying: "He whom you seek praises from is he you will learn to fear". This is the story of not just the Nigerian banks, it a reflection of an our collective insecurity. I hope some Nigerians firms rise up to rate Nigerian because he who wears the shoes knows where it hurts. And leaves the french to their quasi intellectual pretenses.

The major culprits of the global financial crisis apart from the greedy bankers ,unargueably are the finanacial sector regulators and the so-called rating agencies. Without a doubt there are issues with Nigerian banks with the 'irrational exuberance' that led them to commit so much to marginal loans and the ill-structured Nigeria stock exchange, that said, I take this rating without weight. Prior to the collapse of Lehman brothers their ratings was good and what happen......., hence the CBN should indeed sit up as the regulator.

What indices was used for this rating. They are just assumptions which are baseless. The spokes person for first bank would have been singing a different tune if they were classified otherwise. She was not objective. Cudos to others who made objecive comments.

Phil which of the banks do you work for?

Absolute Baloney. I shouldn't comment much until the basis for African Report comes out but so far, it has really no substance. It will just incite unbalance in the market as customers now start using the fictitious ratings to judge the banks. There might be some truth in it but it all seems too speculative.

I've always and still believe that rating agencies are just playing on our intelligence, unfortunately, we are not so dumb. not that we are so stupid to dump the ratings anyway but we know that such rating are not thorough and are quite misleading. As the first respondent said, where were the agencies when the "great" American banks were going bankrupt? As a staff of one of the strongly rated banks, it will be easy for me to claim that the ratings are true, but no! The CBN should clear the dust and let the public know the true stance of things in the banking industry in Nigeria. In my own oipnion anyway, most Nigerian banks are satisfactory.

I am disspointed in firtbank for accepting the rating of an institution that did not provide criteria for such exercise. It is sad that french institions which are known for anti-english-countries dispositions will relied upon rate anything of english origin. To hell with them.

I feel saddened when i read the report not because of the rating itself,but because their are a lot of Nigerians who are either illitrate or semi-literate who would have read or heard about the report and jump into conclussion thereby making wrong decision based on that.It is more sad that even the so called literate are not sound when it comes to financial analysis.It very important that the CBN governor and the entire financial regulators come out strong and condemn this report or at least put it into perspective so that the likely chain reaction that may follow after will not distrres or have adverse effect on the banks especially the ones rated as 'shaken' and 'stressed'.

this is not the time to argue about indices or figure. the truth is that most nigerian banks are hollow, superb buildings cars well dressed staff, but no ethics, dubious processes and above all looking for govt money and stolen funds from politicians as deposit. the truth is better to act now and safeguard your money. if it turns out to be a hoax fine, if not you are home clean and dry.

We should not allow these selfseeking foreign organisations to cause unnecessary panic among the Nigerian public. CBN is the only authority that should be allowed to make such a weighty and sensitive pronouncement. Even at that, CBN must present it in such a way that it will not generate tension that is capable of sinking those banks that they(CBN) want to save. The words like "shaky and stressed" are too costly to be used to describe a bank; a Nigrian bank at that, after all the expriences we had in the era of failed banks. It is also pathetic that there is no official reaction from CBN on this publication. I hope that Sanusi will not throw us back to pre-1999. If it were to be Soludo, he would have condemned, reject and rebuke these treacherous and scrupulous entities who think they can rundown our economy so that they can come in and buy us up. Lastly, The Punch and any other newspaper that published this unverified (at least from CBN),devastating and unpatriotic report that is capable of eroding ALL the gains of banking consolidation, should be sanctioned. The report is unethical and destructive.

If our banks could be honest with their regulatory declarations, there wouldn't be so much room for speculation in the first place. Today you are told a bank is healthy, tomorrow the CBN puts a board in place for it. Who are we deceiving? If we are honest with ourselves, the report, even though without any known basis, voices out our various fears about some of our banks we are not so sure about. Maybe this would make someone sit up and do the right thing!

One of the major roles of the financial regulatory authorities is to protect the financial system from instability. It is imperative that the activities and reports of this Rating Agencies be strictly regulated. If not, in no distant time, they will throw the Nigeria financial system into serious tension and instability. Nigeria and Nigerians cannot afford the cost of widespread contagious bank runs.

These claims by TAR whether verified or not should tell us all one thing that all is not well with the banking sector. Investors and customers should be wary, there is no smoke without fire.

Bankers are reacting seriously and doing their best to discredit the report....lol Only Amusa, Ayoka and Saidu have objective comments. A lay man like me can only see the report and feel apprehensive, put yourself in my shoes and tell me you won't feel the same way.

Please banks around the World get ratings from other banks (banks of america gives a buy or sell rating to other banks such as Wells fargo, and it happens vice versa), newspapers and rating agency. There is nothing wrong in what the newspaper did, what they need to do is publish how they reached that conclusinons. The banks need to focus on transparency and disclosure and people will not be speculating.

This is what you get when you allow others to think for you. Why have Agusto & Co, GCR and other Nigerian rating agencies not gone out to rate American and European banks. The CBN must live to its responsibilty so that Nigerians do not have to rely on these so called foreign agencies. Why has TAR not written on French and European banks that are on the verge of collapse. The Nigerian banking industry is facing challenges but they are surmountable, even without bailout, unlike American and European banks. This report will make all the stakeholders to sit up. The TAR report has poured tar on the Nigeria financial sector. It is already causing panic and will not be surprised if funds start moving across banks. The CBN need not be silent about this. It must come out to make a categorical statement.

It is sad thst when the new Central Bank Governor should have risen to the occassion to defend Nigerian Banks while taking out time to independently investigate the nitty-gritty of the so-called rating, he decided to return a non commital " NO COMMENT" perhaps because the bank which produced him as governor was rated as strong. We hope his stance will engender healthy competition and not otherwise.

This report is riduculous.I hope the source of this information is authentic and not political. The question that baffles me often is: Why are these banks declaring large profits in their reports despite their shaky and distressed features?I am afraid of the situation of our banks.

Indices or none, it is clear that most Nigerian Banks think "mobilizing deposits" from their relationship with the Federal,State or Local Government is banking-even beggars mobilize deposit at bus stops.It is possible to find a Nigerian branch of a Bank with a balance sheet of N4.0B but 95.0% of these funds belong to a particular Government account only! what happens when the Government pulls out such funds for their projects?The proper indices for measuring bank performance is their contribution to the Real sector.Unfortunately this information is not clear cut.We also know for a fact the banks that were exposed to Margin Loans and Oil and Gas during the purported boom era.Need i say more?

Nigerian Banks do not operate without a regulatory body. Any publication against Nigeria banks should be with the approval of such body. Am surprise that an international rating company is publising the rating of Nigerian Banks without the following: 1) no regulatory APPROVAL I.E the CBN 2) no criteria for such rating 3) no analysis for such rating 4) the rating is not data base All they have succeeded doing is creating FEAR and PANIC to Nigerian investors and Nigerian as a whole. For more comment on this, the criteira for the rating should be published and the approval of the regulatory body in charge of Nigerian Banks (CBN) should pulished along side.

Though there are serious governance issues in Nigerian banks and the inaccurate data they feed to the public has been noted, nevetheless, the African Report quoted above did not provide us with any basis for arriving at their conclusion(s). May be this is a clarion call to CBN and NDIC to sit up. When you fail to do your duty, others will perform it for you.

Your economy is moving from Frontier to emerging market and Your financials are the bed rock of your economy. lots of emerging markets are afraid that investments that use to come to them will now be channelled to your economy and they are becoming afraid. Take not away indians (you find them every where) working for these rating companies from this mischief

I HOPE CENTRAL BANK WILL BE SENSITIVE ENOUGH TO TAKE THIS UP BY BRINGING OUT THEIR RATING. WE SHOULD NOT BE EMOTIONAL ABOUT THIS BUT DO THE APPROPRIATE RATING ON TIME. WE SHOULD NOT DISCARD THIS RATING. IT MIGHT BE TRUE.

Let us address the facts and stop being sentimental about the report. Criteria or no criteria, assumptions or assumptions, Is it true that Erastus Akingbola of Intercontinental Bank doubles as the bank's CEO and Chairman of its Audit Committee? Is it true that most Nigerian banks realise 80% of their annual profit during the last quarter of the year? Is it true that baks were lending money to customers to buy their own shares? Is it true that Jim Ovia of Zenith banks owns most of the properties used by the bank as branch offices/ Is it true that some of the "big" banks raised over N800 million as bribes money to lobby for the re-appointmet of Soludo as CBN Governor.

I dont why most bankers commenting here are discreating the report when their adverts run daily on CNN (I wonder for what in the first place). The trut is that most of the nigerian banks rely on stolen money from politicains and are seriuosly engaged in money lundering & roundtrippings. It is only in nigeria where banks gives loans to their staffs and customers to buy their shares!!!! I still continue to ask why are they opening up branches in in the UK. I doubt if an an average english man will ever open an account with a nigerian bank in the uk neither will nigerians. Nigerian banks cliamed to be strong yet it is very difficult for small bussines to secure loans. The truth is that once we can stop politicians from looting our money I bet anyone here, most of these banks will go under..!!!!!

I'm no economist, but I think it is safe to assume that to get the true state of a country's economy all you need do is feel the pulse of its financial institutions. If that is given, then for years, our banks have been sending wrongs messages to everyone. About 10% of Nigerians control 80% of our colleective wealth. If one takes a good look at this seemingly dubious report, one will see that the "strong" banks represent the 16% 0f the total number of Nigerian banks. Interesting,eh? Go figure.

The mighty can fall. Barings, Merill Lynch, etc. Now is the time for Nigerian banks and their owners to come clean and return to true banking. If they don't, they will FAIL and FALL. And the 'bigger'they are, the harder the thuds when they will fall! Simple. If any of the present owner/managers think they can do Forum Savings on Nigerians in the 21st century, they should think again. If Charles Taylor or Bemba or Omar Bashir would be made to account. Bank manager na small matter to hunt and prosecute. One word for the wise....

What is required in the Nigerian Banking sector is more transparency and reduction / abolition of high degree of conflict of interest. As a few contributors have already mentioned, the rating agencies are there for propaganda. Where were they when, World com and Enron collapsed. After the collapse of these two companies with the connivance of their accountant: Arthur Andersen, new regulations: SOXA (Sobhan Oxley), Mifid, FATF, Basel-II (upgraded) etc were introduce to prevent such from happening again. Even all these could not stop the biggest financial distress in financial / economic history that we are presently experiencing. The Assets backed securities (cdo’s), the contaminated securities backed by securitized American mortgages were awarded good ratings by the all-knowing rating agencies, and the rest is history. While any right-thinking individual can connect the dotted lines, by asking the simple question: Why have houses in America recorded 100-150% increase in prices in a time frame of a few years, without a correspondent increase in wages / loans? The Brokers, rating agencies and other interested parties created a bubble, to the extent that bankers bought into financial instruments / portfolios without being able to ascertain the financial value/worth. The Casino strategy, until the bubble busted! The sad thing in this whole story is that, it was professionally orchestrated that the institutions that are trusted to be looking after and acting as our risk guidance (risk-aversive) institutions i.e. The insurance companies, the pension companies, government institutions etc, found themselves deeply invested in these contaminated financial products into the tune of Billions of dollars that eventually turned out not to be of any worth than toilet papers. And then the right down began. Since the consolidation, the banks that now operate on the Nigerian market, have capital base of billion of dollars. They need to make their exposures known, and also indicate how same are hedged. There are very simple variables for this, i.e. 1. Tier 2 Capital: A term used to describe the capital adequacy of a bank. Tier II capital is secondary bank capital that includes items such as undisclosed reserves, general loss reserves, subordinated term debt, and more. 2. WACC. An average representing the expected return on all of a company's securities. Each source of capital, such as stocks, bonds, and other debt, is weighted in the calculation according to its prominence in the company's capital structure. Etc.

I am surprised that some of the commentators are taking a swipe at this French rating and putting pressure on Lamido sanusi, the cbn governor to reject the rating. Furtune, one of the commentators has mentioned most of what I want to say. Most of the banks were establishing branches abroad, England, US, Rwanda and Ghana. You will be surprised that Access bank went to Rwanda, a war torn country. What for. It seems that the consolidation program went into the heads of most of the bank ceos and their thinking was that they have enough money to establish branches all over the world. They did not look at the cost implication of these branch networks. They also forgot that countries like the UK has the rule of law so the banks cannot do the under the counter businesses that they normally do in Nigeria and Soludo will look the other way. It is ok if one or two banks have branches in London but this idea of joining the bandwagon is a problem. The same thing with credit card...most Nigerian banks now issue visa or master card to their customers. They forgot to ask, how many Nigerians travel abroad? How many Nigerians have foreign currency to play with? Some of these credit cards are not even accepted in North America. Thrice, i have been denied the usage of my Nigerian master card on on line or phone call purchases. They always ask me, is it an international master card? It is accepted at point of sale or one or two on-line purchases so do not get me wrong. I once asked a top Nigerian banker why these banks just do follow follow without looking at cost implications? She told me that the joke among Nigerian bankers is that for bank shareholders, it is return on investment but for bank ceos, it is return on ego. I was told that pictures of most of these ceos are on the cover and back pages of most Nigerian newspapers everyday and that they try to compete with Nollywood stars in this instance. The other thing is that the banks until recently gave all manner of loans to their staff. And some of the staff, instead of investing the loans in productive ventures will rather go to buy SUV/jeeps, trips abroad to show that they have arrived and so on. Finally, it is my believe that some aspects of the rating might be correct. I phoned Nigeria on Sunday and the man I spoke to told me that lay off/cutting loose is now the order of the day in some Nigerian banks. The man mentioned two banks specifically-UBA and Intercontinental bank. Some staff will go to work in the morning, sack letters are waiting for them by the time they get home in the evening.Later, that day I had an on line chat with a banker who works for a different bank and he told me that retrenchment is an ongoing thing in the banking sector. In some instances, it is via e-mail.I had the jitters because I have so many bankers as friend in Nigeria. Today, I phoned my stock brokerage outfit-which is a subsidiary of a bank, and virtually 75% of the guys I used to know have been laid off. So sad. The bank that owned the stock brokerage outfit, is listed as shaky in the above rating. If most of the banks are solid, why are they laying off? Some of them will borrow money to pay dividends and they will make sure that you as the shareholder will not get your dividend warrant until 6 months has passed. So you have to go to their registers to re-vaildate the warrant. Zenith Bank is a very good example of this sharp practice. Yet they receive all manner of awards. Banker of the year, best bank in Africa, Best bank in Nigeria. They go as far as London and New York to receive these awards. When they receive these awards, do they tell us the criteria that the givers of the award use. They do not have issues with the foreign givers of the awards then. So they should keep quiet now and do the normal banking practice. Let me give them my two cents: reduce the number of official cars. Restrict the level of staff that can have official cars and drivers. Reduce your advertisement and image laundering, etc

THOSE BEHIND THIS RATINGS SHOULD KNOW THAT THEY CANT PLAY GOD. WHAT INDICES WERE USED TO BRING ABOUT THIS RATING. CENTRAL BANK OF NIGERIA, OVER TO YOU...

Helen Ogbo! Unfortunately you missed the mark, a typical Nigerian politician you are, who shouts fair play when he is wining. Your response was the least I expected from a spokesperson for a pride bank like First Bank. I will watch you next time when some of these 'arm chair journalism' turns up against First Bank. On the other hand the report should not be waved off, but should be regarded as a wake-up call and indication that all may not be well afterall. In Nigeria, every rumour has a strong element of truth in it. Then the next step will be, Have the regulatory body lived up to expectation, if NOT what can they do ? Finally, CBN gov. Sanusi should watch is choice of words, First Bank and CBN jobs are two jobs apart. Ifeanyi. Malaysia

Gbenga wrote:"They go as far as London and New York to receive these awards. When they receive these awards, do they tell us the criteria that the givers of the award use. They do not have issues with the foreign givers of the awards then"...ironic isn't it?...and so true! We can protest all we want but the truth is that these banks have issues which need to be addressed. All those discrediting the ratings should pipe low cos that's not the point. As someone stated earlier...'there's no smoke without fire'. Infact, I'm surprised Intercontinental is shaky....they should be stressed! I only pity their staff who have been under so much pressure from the bank!

I am not surprised that the name of a perticular 'new generation' bank appeared in the 'shaky' list I have first hand knowledge of the massive 'settlement' that took place between the bank and CBN officials each time that inspectors where sent to audit its books After such Audits by soludo's boys the bank always got a tripple A rating The CBN knows that TAR report is 90% correct

Any classification that does not emanate from CBN AND NDIC is baseless, uninformed, misleading, and should be disregarded by enlightened minds.

Whilst I agree with the opinions that the magazine that published this report is suspect, it is imperative to note that Nigerian banks are not as healthy as they seem. Financial reports are doctored and non-performing loans are not reported. The uniform FYE at December should provide a clearer picture on the state of the banks. As for me, there is no smoke without fire!!

Frankly am not so down with the report but we cant just ignore the message of the report because most of the awards and accolades are celebrated on the pages of news paper without asking for the criterion of the Awards and accolade. Am rreally surprise that the number of stress bank are so minimal, am expecting up to like ten in the CBN report to be out in December. Banks profits are just 419......... chikena

This is Great Kudos to the strong Banks, I know you Guyz wont stop here please others lets be mindful of how customer service is down following the CBN rules it will help out, to serve us well.

In as much as I do not support mercenary attacks on our banking system, I believe there is a fine thread of truth in the report. Majority of our banks are in the league of "the-boat-sinks-and-the-bank-collapses". Are they not the same wonder banks that sold to us over priced-shares and were declaring jumbo profits while those they were financing were declaring huge losses. Majority of the banks will not put a dime into manufacturing, talks less of financing new projects. Now that their overseas collaborators who were dumping goods on us are melting, our banks would likely melt too. Remember, balance sheet figures are made up of debits and corresponding credits. Mallam Sanusi should not bail out any bank. Let them too taste the poison that were served to us on the floor of the Nigerian stock exchange. Then they would learn how to behave responsibly.

i am so glad we have a forum to discuss such an issue, in my opinion i believe TAR should give us their basis, CBN and NDIC should wake up to their responsibilities as true regulators, while all nigerian banks should remember their main objective is to satisfy their customers and shareholders

Majority of Nigerian Banks are not healthy. Don't expect CBN/NDIC to tell you this because the function entails managing such information as full disclosure of the such will cause a run in the banking industry and that will be a disaster for the economy. What you will hear from them is usually a take over and appointment of Interim Board like what happened in Spring bank. But we are funny as a people.....how come no body has asked about the politics being played out in giving banks that were closed their licences? Was SGBN, SAVANNAH, FORTUNE and others closed just because of politics? There must have been serious distress in these institution for them to have had their licence withdrawn. We only just looked at the surface and shout POLITICS. It is unfortunate that the owners used media to push the POLITICS issue as those in the know will tell you how they milk the banks dry and now got away with it. The LOANS they took but not repaid are buried in the banks booked. That is one issue the media shut from us. Just watch the scene that will play out in the industry soon, many of these banks will either merge or......go under because they keep defaulting on interbank funds and loose credibility. If CBN/NDIC do not advance further line to them, many people will have their money trapped untill payoff by NDIC. Its our hope SANUSI can clean the industry.....not just the banks only but he should closely monitors those so called MICROFINANCE BANKS, FORUM is still fresh in our memory and what is happening now in that sector, we are fast moving towards that era unless REGULATIONS is strengthened.

This are the same banks that froze the accounts of so called ''Wonder banks'' because of politics when people are withdrawing their deposit and putting it in ''wonder banks'', nemesis have finally caught up with them now. The banks are just the extension of the corruption in government.

Where is soludu ?

@Furtune: Spot on. When will we ever be more objective? When the same agencies where giving awards such as "the strongest bank", "best bank", "the happiest bank" etc, the banks and the public are always ready to quote the award given by "bingo and co rating agency"! Now they are giving us negative rating and we are shouting. If one is very observant, you will know that most Nigerian banks are actually sick. If there is real and serious regulation, most of them will go under period. Furtune has said it all.

@DAUDU E You really expect the CBN to tell that the banks are weak? c'mon, there will be a bank run.

I think there is akind of foul smell in this rating without mincing word.But it serves the banks right as they have always pride themselves with foreign rating agencies. therefore look inward as nigeria start rebranding the banks too should reduce the fooling of nigerians in the name promotional adverts

chika ezegolo God will definite bless you for your wonderful comment. My problem with the Northern is that they will not allow the best to do the JOB. Soludo did a wonderful job at CBN and my honest pray is that this guy call lamido will not mess up our economic.. Power is gone, no job, seven point agenda gone and economic is ............

Ratings have always been overrated, anyway. What's all the craze about? In fact ratings were part of the reasons the entire world is going through a recession at this time. Nigerian banks have always been rated and one more rating doesn't change anything. The risks are still there and no matter the rating criteria used would remain there. What's important here is that each one of us should come to some conclusion about how much risk they are willing to take with each bank and how much risk they are willing to take leaving their money at home. It is a question of risk appetite, and no rating should change that.

Much as I would want to calm the nerves of Nigerians, the way some banks are being run shows that they are distressed or have distress symtoms.

i smell foul play in the whole scenario. if union bank can be classified as shaky then it means we are in trouble.

ijebuman is running gt bank.....is going to be hard for banks run by ijebuman to be distress..........go to nigeria banks history.....me i be mallam but i trust ijebuman with money.

Know your facts. When did bank of america fail?

at last, with the recent development, this rating is true

i think ther is confusion in the cbn about this banks,the sam cbn that told the public that bank phb and afribank are satisfactory has now sacked their mds,let nigerians know the truth or is there anything fishy

I need to know all about banking distress in Nigeria: and the criteria or yardstick for measuring bank distress.

First bank is the best....