- Home
- StockWorld
- Shareholders’ Agonising Wait for Banks’ Full Year Results
Shareholders’ Agonising Wait for Banks’ Full Year Results
- By Business World
- Published April 6th, 2010
- StockWorld
- Unrated
The common year end for domestic banks commenced on December 31, 2009. Three months into the new year, only two banks have released their financial reports and shareholders are anxious. OKEY NWANKWO examines the reasons why the results are delayed and concludes that it is important for banks to promptly release the results.
Introduction
IN the days before adoption of a common year end for banks, the media would have been awash with full year financial reports of banks announcing landmark earnings and profits. Banks were competing for early colour pages of newspapers to publish their results and woe betide the concerned Corporate Affairs staff member who fails to secure an early colour page. Then banks operating at the top echelon of the industry were in a severe competition to see who wins the day in terms of securing early pages as well as level of publicity achieved in the publication of financial results. Most banks were announcing cooked results as they usually borrow from other banks at the interbank market to pad their financial reports. Apart from accessing the interbank market to pad their results, some banks do not accurately report loan losses; in essence, an observer may not know the true value of the financial report he is holding in his hands. The scenario continued until the Central Bank of Nigeria (CBN), in a bid to control the situation and bring sanity to the system, stipulated a common year end of December 31 for banks.
The move by the apex bank jolted the banking system. Banks that hitherto retied on the interbank market for short term funds which they used to pad their results became jittery and started offering outrageous interest rates to other banks in order to borrow. Major placers of funds in the interbank were not willing to lend as they need all their funds to make a good showing in their full year results. The jolt was so severe that the apex bank had to postpone the implementation twice. However, December 31, 2009 was finally fixed as the beginning of the common year end for banks operating in the domestic economy.
With common year end for banks beginning December 31, 2009, it is expected that banks ought to have started publishing their full year financial reports before the close of the first quarter. But it was not so as only Zenith Bank and United Bank for Africa succeeded in making public their full year reports at the time of going to press.
But stakeholders are asking, what is delaying the remaining banks from releasing their full year financial results?
Reasons why results are delayed
Several reasons are advanced why full year results of banks are delayed. A stockbroker who pleaded annoymity told BusinessWorld that auditors may be delaying some of the banks’ results from being released. He said that following the common year end, almost all banks are having their financial results being audited and as it usually takes about three months for auditors to finish work on banks‘ accounts, the public should expect the full reports within the second quarter.
A source from CBN corroborated the shareholder saying that as soon the apex bank gets the audited results from banks, it cross checks them to ensure that all necessary provisions are made as well as that they conform to the appropriate standards before approving the results for public consumption. He said when a bank meets the requisite and appropriate standards in its audited financial report, the apex bank had no reason to withhold its approval but when distortions are discovered in any financial result submitted, the CBN would withhold its approval and insist on the affected bank to correct the observed anomaly.
A shareholder, James Nnamdi offers another reason why release of results of most banks is delayed. He speculates that most of these banks might have sustained losses and may not have even submitted their audited results to the CBN. He said that following the common year end, most banks that depend on the interbank to shore up their books are no longer capable of doing same now which will now expose their true state. According to him such banks may be foot dragging as to find a soft landing out of their predicament.
Shareholders react to the delay
Many shareholders are not finding funny that the full year of most banks has yet to be made public. They hinge their argument on the fact that they need to know the state of their investments. Though some are calling on the apex bank to quickly approve the results so that they would be made public, others are of the stance that the CBN should take its time to go through the submitted results to prevent distortions.
For Boniface Okezie of the Progressive shareholders Association of Nigeria (PSAN) the announcement of audited results of the banks will go a long way in reducing the tension among some investors who are highly apprehensive about what their performance would be. He argued that the CBN having done an early audit to September 30, 2009, there should not be any need for further delay in allowing the banks to release their results.
He said, “If the CBN really knows what it is doing and really meant well for the banks, there is no reason for keeping all the banks from releasing their results. Agreed that the rescued banks may have some issues to explain, what about the other banks that passed the special audit. I do not think their results should be of much headache for the CBN to handle. I believe that by now some of the banks not rescued by the apex bank would have announced their results because if their accounts have been audited up to September 2009, it should not take much to audit the remaining three months.
Some of the banks have recorded significant recovery since the beginning of the year and this is partly due to expectation by investors that the worst might be over for the banks and are thus taking early position in readiness for profit they will declare as from next year. But if their audited accounts are not made public early enough, it may dampen investor enthusiasm. That is why it is very important for the CBN to allow the accounts that are ready to be published so that investors will know their fate.”
But Chief Timothy Adeshiyan of the Nigerian Shareholders Solidarity Association (NSSA) is of the view that the delays are indications that the CBN is making serious attempts to ensure a thorough auditing of the banks is done. He argued that the reform embarked upon by the apex bank is bringing sanity to the banking system and in the long run, shareholders would be better off. Giving an example of Zenith Bank, he said the results are encouraging and every shareholder should support the CBN in strengthening the banking sector.
Importance of releasing the results
If all the financial results of the banks are released, it would boost investors’ confidence. For any bank that posts a good result, investors would reward it and it would record price appreciation. Having knowledge of how banks performed in the last financial year would help investors make decisions on whether to continue holding on to the stocks or disposing them. Shareholders are anxious to see the performance of the rescued banks which are under the management of the CBN appointed chief executive officers. Though shareholders are not hoping for dividends from the rescued banks as their management will come and declare losses but want to know exactly what is going on in their banks.
An investor in one of the rescued banks stated the importance of releasing the full results in the following words, “As shareholders, we ought to know the state of our investments in these banks taken over by CBN. We need to see their full year reports, see how well or bad they performed in the first common full year ended December 31, 2009. Having this information will enable investors take decisions.
The capital market is driven by information and now, we have yet to see the full year reports of these banks. How we can take decisions without seeing full year reports of these banks, he asked.
Conclusion
For some years, investors in the domestic capital market have counted their losses instead of favourable returns. They invested with hope of getting dividends or their investments gaining price appreciation but had their holdings almost wiped out by the global financial meltdown.
Investors in banking stocks were even more jolted as central Bank of Nigeria (CBN) wielding the big stick sacked the management of eight banks and replaced them with new teams.
The sack and attendant remarks by Lamido Sanusi, CBN governor that investors in affected institutions may have lost all their investments added to their misery. Therefore early release of banks’ full year audited financial results will assuage their pain. They will at least see the state of their investments.
Introduction
IN the days before adoption of a common year end for banks, the media would have been awash with full year financial reports of banks announcing landmark earnings and profits. Banks were competing for early colour pages of newspapers to publish their results and woe betide the concerned Corporate Affairs staff member who fails to secure an early colour page. Then banks operating at the top echelon of the industry were in a severe competition to see who wins the day in terms of securing early pages as well as level of publicity achieved in the publication of financial results. Most banks were announcing cooked results as they usually borrow from other banks at the interbank market to pad their financial reports. Apart from accessing the interbank market to pad their results, some banks do not accurately report loan losses; in essence, an observer may not know the true value of the financial report he is holding in his hands. The scenario continued until the Central Bank of Nigeria (CBN), in a bid to control the situation and bring sanity to the system, stipulated a common year end of December 31 for banks.
The move by the apex bank jolted the banking system. Banks that hitherto retied on the interbank market for short term funds which they used to pad their results became jittery and started offering outrageous interest rates to other banks in order to borrow. Major placers of funds in the interbank were not willing to lend as they need all their funds to make a good showing in their full year results. The jolt was so severe that the apex bank had to postpone the implementation twice. However, December 31, 2009 was finally fixed as the beginning of the common year end for banks operating in the domestic economy.
With common year end for banks beginning December 31, 2009, it is expected that banks ought to have started publishing their full year financial reports before the close of the first quarter. But it was not so as only Zenith Bank and United Bank for Africa succeeded in making public their full year reports at the time of going to press.
But stakeholders are asking, what is delaying the remaining banks from releasing their full year financial results?
Reasons why results are delayed
Several reasons are advanced why full year results of banks are delayed. A stockbroker who pleaded annoymity told BusinessWorld that auditors may be delaying some of the banks’ results from being released. He said that following the common year end, almost all banks are having their financial results being audited and as it usually takes about three months for auditors to finish work on banks‘ accounts, the public should expect the full reports within the second quarter.
A source from CBN corroborated the shareholder saying that as soon the apex bank gets the audited results from banks, it cross checks them to ensure that all necessary provisions are made as well as that they conform to the appropriate standards before approving the results for public consumption. He said when a bank meets the requisite and appropriate standards in its audited financial report, the apex bank had no reason to withhold its approval but when distortions are discovered in any financial result submitted, the CBN would withhold its approval and insist on the affected bank to correct the observed anomaly.
A shareholder, James Nnamdi offers another reason why release of results of most banks is delayed. He speculates that most of these banks might have sustained losses and may not have even submitted their audited results to the CBN. He said that following the common year end, most banks that depend on the interbank to shore up their books are no longer capable of doing same now which will now expose their true state. According to him such banks may be foot dragging as to find a soft landing out of their predicament.
Shareholders react to the delay
Many shareholders are not finding funny that the full year of most banks has yet to be made public. They hinge their argument on the fact that they need to know the state of their investments. Though some are calling on the apex bank to quickly approve the results so that they would be made public, others are of the stance that the CBN should take its time to go through the submitted results to prevent distortions.
For Boniface Okezie of the Progressive shareholders Association of Nigeria (PSAN) the announcement of audited results of the banks will go a long way in reducing the tension among some investors who are highly apprehensive about what their performance would be. He argued that the CBN having done an early audit to September 30, 2009, there should not be any need for further delay in allowing the banks to release their results.
He said, “If the CBN really knows what it is doing and really meant well for the banks, there is no reason for keeping all the banks from releasing their results. Agreed that the rescued banks may have some issues to explain, what about the other banks that passed the special audit. I do not think their results should be of much headache for the CBN to handle. I believe that by now some of the banks not rescued by the apex bank would have announced their results because if their accounts have been audited up to September 2009, it should not take much to audit the remaining three months.
Some of the banks have recorded significant recovery since the beginning of the year and this is partly due to expectation by investors that the worst might be over for the banks and are thus taking early position in readiness for profit they will declare as from next year. But if their audited accounts are not made public early enough, it may dampen investor enthusiasm. That is why it is very important for the CBN to allow the accounts that are ready to be published so that investors will know their fate.”
But Chief Timothy Adeshiyan of the Nigerian Shareholders Solidarity Association (NSSA) is of the view that the delays are indications that the CBN is making serious attempts to ensure a thorough auditing of the banks is done. He argued that the reform embarked upon by the apex bank is bringing sanity to the banking system and in the long run, shareholders would be better off. Giving an example of Zenith Bank, he said the results are encouraging and every shareholder should support the CBN in strengthening the banking sector.
Importance of releasing the results
If all the financial results of the banks are released, it would boost investors’ confidence. For any bank that posts a good result, investors would reward it and it would record price appreciation. Having knowledge of how banks performed in the last financial year would help investors make decisions on whether to continue holding on to the stocks or disposing them. Shareholders are anxious to see the performance of the rescued banks which are under the management of the CBN appointed chief executive officers. Though shareholders are not hoping for dividends from the rescued banks as their management will come and declare losses but want to know exactly what is going on in their banks.
An investor in one of the rescued banks stated the importance of releasing the full results in the following words, “As shareholders, we ought to know the state of our investments in these banks taken over by CBN. We need to see their full year reports, see how well or bad they performed in the first common full year ended December 31, 2009. Having this information will enable investors take decisions.
The capital market is driven by information and now, we have yet to see the full year reports of these banks. How we can take decisions without seeing full year reports of these banks, he asked.
Conclusion
For some years, investors in the domestic capital market have counted their losses instead of favourable returns. They invested with hope of getting dividends or their investments gaining price appreciation but had their holdings almost wiped out by the global financial meltdown.
Investors in banking stocks were even more jolted as central Bank of Nigeria (CBN) wielding the big stick sacked the management of eight banks and replaced them with new teams.
The sack and attendant remarks by Lamido Sanusi, CBN governor that investors in affected institutions may have lost all their investments added to their misery. Therefore early release of banks’ full year audited financial results will assuage their pain. They will at least see the state of their investments.
