Steady decline in ROAEs
Since peaking at 20% in 2012, the average ROAE of our coverage universe of Nigerian banks moved down by around 100bps y/y up until 2014, despite strong loan growth in the 20-30% y/y range and stable a set quality ratios. Regulatory pressures are the main reason behind the trend in the ROAE. A combination of the introduction of the AMCON levy, marked reduction in certain fee incomes, the persistent rise in the cash reserve ratio and tighter rules on capital requirements have cost the banks dear – we estimate by up to 500bps in ROAE terms for some banks.
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