FitchRatings, an international ratings agency, on Wednesday predicted improvement in the financial performance of some of the highly rated Deposit Money Banks in the country.Fitch, in a report summarising its view on several high-level banks in the world, said, it expected the financial performance of most of the Fitch-rated Nigerian banks to improve in 2011 as a result of lower impairment charges and funding costs.It said, Over the medium-term, higher levels of credit growth, non-interest income and a greater cost management focus may support banks earnings as the competition for lower-cost deposits intensifies.The banks half-year results for 2011 show a trend of improved, more stable earnings due to significantly lower impairment charges compared with 2009-2010. The first half results reflect some pent-up demand after prolonged uncertainty with cost management expected to take on increased focus.The rating agency noted that the banks benefited from the sale of non-performing loans to the Asset Management Corporation of Nigeria during 2010 and half-year 2011, thereby affecting their asset quality.It added that banks proactively used restructuring as a risk management tool to offset the negative impact of further NPL inflows on asset quality indicators.According to Fitch, inter-bank liquidity tightened following the expiry of the Central Bank of Nigerias inter-bank guarantee on September 30, 2011, which has been extended to December 31, 2011 for the rescued Nigerian banks.Fitch, however, expects that the Tier 1 capital ratio of the banks may continue to be eroded by asset growth and low internal capital generation due to generous dividend policies.It said, Considering the difficulties in raising fresh capital after the banking crisis, it is expected that banks that hold higher levels of Tier 1 capital would be better placed to grow. Higher levels of capital are appropriate for Nigerian banks in light of the difficult local operating environment and credit concentrations as well as low impairment coverage ratios in the case of certain banks.Fitch, last week, revised the outlook of Nigerias credit rating to stable from negative, saying that the likelihood of reforms has increased as the government appointed a strong economic team.Fitch also affirmed Nigerias long-term foreign currency Issuer Default Rating at BB- and Long-term local currency IDR at BB. The agency also affirmed the Short-term rating at B and Country Ceiling at BB.Fitch Ratings is a global rating agency that provides rating through independent and prospective credit opinions, research and data.
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