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Wednesday , 13 December 2017

Zenith, UBA, 4 Others Make N241bn In TBills Investment

Six money lending banks have raked in N241 billion interest from their investments in Treasury Bills in 2016.
They are Zenith Bank, United Bank for Africa, Access Bank, Stanbic/IBTC Holdings Plc, Guaranty Trust Bank and Wema Bank.
This followed federal government’s increased issuance of Securities, including Bonds and Treasury-Bills (T-Bills) in 2016.
According to a report obtained by our correspondent, the income earned by these banks increased to N241 billion in 2016 from N204.96 billion earned in 2015.The federal government was expected to borrow around N984 billion through T-Bills & bonds from local market and N900 billion from foreign borrowing to bridge its budget deficit, which is estimated at N2.22trillion in the 2016 budget.
Commercial banks’ investment in federal government risk-free business and high yield investment securities soared in 2016 as Central Bank of Nigeria (CBN) continued to raise capital through T-Bills.
T-Bills are short-term debt instruments issued by the federal government through the CBN to provide short term funding for the government. They are by nature, the most liquid money market securities and are backed by the guarantee of the federal government.
Specifically, Guaranty Trust Bank’s Interest generated from T-Bills in 2016 gained 17 per cent from N45.9 billion in 2015 to N53.7 billion in 2016, while Zenith bank interest income on T-Bills investment rose by 16.2 per cent to N60.2 billion from N51.8 billion recorded in 2015.
United Bank for Africa’s interest income on T-Bills investment rose by 24.5 per cent to N45.8 billion from N36.7 billion. Access bank generated N44.88 billion interest on T-Bills in 2016 from N44.35 billion, while Stanbic IBTC Holding interest income on securities appreciated by 54 per cent to N31.36 billion from N20.29 billion in 2015.
Lately, Wema bank interest income on T-bills thus dropped by 8.6 per cent to N5.2 billion from N5.75 billion in the previous year. However, the above commercial Banks had invested N1.78 trillion in T-Bills last year. Of the six banks, Access Bank has the highest proportion of investment in T-Bills, followed by Wema Bank and Stanbic IBTC Holdings.
Access bank investment in T-bill rose by 139.2 per cent to N69 billion from N28.99 billion while Wema bank total investment in T-Bills increased by 122.8 per cent to N35.6 billion from N15.96 billion recorded in 2015.
The breakdown of Wema Bank investment in T-Bills revealed that the lender’s invested N3 billion available-for-sale investment securities in T-bills last year as against N7.48 billion in prior year.
The bank has N238 million held for trading investment in T-Bills, 94 per cent below N4.7 billion in 2015 and N32.3 billion T-bills held to maturity investment in 2016 as against N3.79 billion recorded in 2015.
Stanbic IBTC investment in T-Bills gained 61 per cent from N149 billion to N240 billion in 2016.
Other Tier One Banks with huge investment in T-Bills are Zenith Bank that invested N557.4 billion in T-Bills from N377.9 billion recorded in 2015, followed by Guaranty Trust Bank that has N421.2 billion available for sale investment securities in T-Bills from N351 billion in 2015 and N65 billion Held to maturity investment securities   in 2016 as against N20.18 billion in 2015.
Furthermore, United Bank for Africa investment in T-Bills appreciated by nearly 15 per cent from N344.59 billion to N395.87 billion in 2016.
Commenting on Banks investment in T-Bills, The Head, Research and Strategy at GTI Securities Limited, Mr. Chucks Anyanwu, said, investment in T-Bills is safe and returns are constant whether the nation’s economy goes severe.
According to him, government has to borrow using the T-Bills and Bond following the dwindling global oil prices
In his words: “The effect of global oil prices has forced government to break and there was urgent need for government to grow its borrowing to be able to fund projects across the country. Out outlook as far as foreign borrowing in 2016 was dim because our reserve was down and were not attractive country to borrow funds.
“There was a lot of loan loss provisions by commercial banks attributed to contraction in Gross Domestic Products (GDP). The nation’s economy in 2016 was in shambles and banks been the critical segment of the any economy were major casualties.
“Last year, Nigeria was in a situation where Government needed funds while banks needed safety of investment – there was a collective needs that was meant.
“The reason why commercial banks were exposed to T-Bills was because they were looking for safe havens, deploy their assets where it will safe and make high yield on investment.”
He noted that banks were the only investors that fit into investment in T-Bills and Bond Market, given illiquidity in the nation’s economy.
He explained that commercial banks investment in T-Bills was a strategy to diversify their portfolio cases.
Explaining further, he said, “There is nothing bad in commercial banks investing in T-Bills provided they were not neglecting credit creation to the real sector. Banks are created to make money besides their financial intermediary”.
CBN, in its Financial Stability Report for 2016 said the T-Bills of 91-, 182- and 364-day tenors totalling N2.1 trillion were issued and allotted during the second half of 2016. This represented a decrease of 14.61 per cent, when compared with N2.5 trillion recorded as at June 2016.
The Financial Stability Report by CBN explained that total subscription was lower at N3.62 trillion, depicting a decrease of 28.41 per cent, when compared with N5.1 trillion recorded in the first half of 2016.
CBN noted that the decrease in T-Bills issued, allotted and subscribed was attributed to the tight liquidity in the banking system precipitated by the sustained mop-up by the CBN, provisioning of funds by banks for the special foreign exchange interventions for Forwards transactions at the foreign exchange market.

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