Factors that will shape banks’ performance in 2024, Financial analyst
By Olusegun Obisanya
A Financial Analyst, Mr Ayokunle Olubunmi has said that factors such as policy changes, economic conditions and technological advancements will influence the banking sector performance in 2024.
Olubunmi, who is the Head, Financial Institutions Ratings at Agusto and Co, disclosed this at the bi-monthly forum of the Finance Correspondents Association of Nigeria (FICAN) on Thursday in Lagos.
Themed “2024 Economic Review/Outlook: Impacts of Reforms on Banks,” Olubunmi posited that predicting the exact outcome is going to prove difficult due to the dynamic interplay of the elements he identified.
He outlined some of the themes that could impact the Nigerian banking sector in 2024 to be a more accommodating Central Bank, hawkish monetary policy, reform of the foreign exchange market, lower FX gains and muted international trade, among others.
According to him, expanding Nigerian banks abroad could diversify risk but face new challenges, noting that strengthening banks’ capital base could improve stability and lending capacity.
The analysist further stated that consolidation could create a larger, more efficient banks but could potentially reduce competition, adding that issuing new licenses could increase competition and innovation, but potentially fragment the market.
He stressed that shake-up in the merchant banking segment could create opportunities for some banks and challenges for others.
He was of the view that reform of the cash reserve requirement when modified could affect banks’ liquidity and profitability.
He also stressed that enforcing loan-to-deposit ratio compliance could drive credit expansion but raise concerns about credit quality.
On basel III transition, the analyst said that implementing stricter capital adequacy rules could improve financial stability but raise compliance costs.
On macroeconomic downturn, he noted that economic slowdown could increase loan defaults and impact banks’ earnings, saying that banks might face competition from non-bank players in digital payments.
