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Subpar Economic Recovery Seen Piling More Pain on Nigerian Banks

Subpar Economic Recovery Seen Piling More Pain on Nigerian Banks

(Bloomberg) — Nigeria’s economy is poised to expand at less than half the pace needed by banks next year to avoid a possible spike in unpaid loans.

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The 2021 outlook for sub-Saharan Africa’s largest economy was cut to growth of 1.7% by the International Monetary Fund on Tuesday, compared with a June forecast of 2.6%. That’ll make Nigeria the fourth-worst performer among nations measured by the Washington-based lender in the region.

Lenders need the economy to accelerate after restructuring about 40% of loans on their books that would’ve soured and should have been booked as non-performing loans. As growth lags, the risk of these reorganized loans going unpaid rises.

“There’s no real sense the economy will bounce back to 4% to 5% growth,” Ronak Gadhia, director for sub-Saharan African banks research at EFG-Hermes, said by phone. “We expect banks’ credit quality to remain under pressure.”

Nigeria’s gross domestic product will probably shrink 4.3% for this year, the IMF said, as a lockdown to contain the Covid-19 outbreak, lower oil prices and rampant dollar shortages weigh on output. GDP last expanded by more than 3% in 2014.



chart: Hidden Misery


© Bloomberg
Hidden Misery

The central bank anticipates that almost two-thirds of credit in the economy will be reorganized this year to help borrowers cope with the economic fallout from the pandemic. EFG expects NPLs will rise to 7.6% of total credit at the end of the year, as the economy deteriorates, increasing impairment charges, Gadhia said.

The Cairo-based brokerage predicts that Nigeria’s GDP will increase by 1% to 2% in 2021, “which is very low, and doesn’t help the banks from an asset-quality perspective,” the analyst said. Earnings per share at Nigerian banks could decline 65% this year, Gadhia said.

The government doesn’t have the financial resources to support the economy,

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Citigroup profit hit by consumer bank woes; warns of more pain

Citigroup profit hit by consumer bank woes; warns of more pain

By Imani Moise and Niket Nishant

(Reuters) – Citigroup Inc beat analysts’ estimates for third-quarter profit on Tuesday, driven largely by a surge in trading, but its results underscored deeper troubles in its consumer bank that struggled with a decline in customers and spending.

The bank, which will have Wall Street’s first woman CEO, Jane Fraser, at its helm early next year after long-time Chief Executive Michael Corbat retires, faces a series of challenges as a coronavirus-induced recession grips American households.

Citi’s shares fell over 4% in early trade as management on a conference call indicated that the third-largest U.S. lender was bracing for prolonged pain, a view that contrasted with JPMorgan Chase Inc’s more upbeat views on loan losses.

“We are expecting a somewhat more muted and slower recovery in both unemployment and GDP through 2022,” said Chief Financial Officer Mark Mason.

“In the crisis we are managing through, we’re not seeing acquisitions or new account openings.”

With the recession crushing consumer and business confidence, and with it demand for loans, Citi reported its first outright fall in revenue this year, down 7% to $17.3 billion in the third quarter.

Profit tumbled by more than a third as its credit card customers closed accounts and spent less.

Revenue in North American branded cards, the growth engine for Citi’s consumer bank going into the year, fell 12%.

The bank, one of the largest credit card issuers globally, said end of period open accounts across its portfolio dropped by 4%, or more than 5 million, and purchase sales slid 10%.

BRIGHT SPOTS

There were, however, some bright spots.

Citi’s trading business turned in another strong quarter, with revenue from bond and stock market trading jumping 18% and 15%, respectively.

Credit costs were helped in part by lower loan volumes, particularly in

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The pain of cinema closures isn’t just economic | James Greig | Opinion

The pain of cinema closures isn’t just economic | James Greig | Opinion

There’s a cinema in south-east London called Peckhamplex, which is one of my favourite places in the world. Set on the bottom floor of a car park, it’s a kind of faded 1990s dreamworld. The colour scheme is lurid, the typography can only be described as “funky”. At first glance, the aesthetic looks like it could be an affectation, marketed to affluent Time Out readers as a “retro-style cinema” selling gourmet popcorn and themed £13 cocktails with names like “The Mia Wallace”. But in fact it’s looked this way since it opened in 1994. Even better than the way it looks, however, is the price. Every film costs £5 and that’s reflected in the demographics of the people who go there. It’s a place that serves the community, but not in a lofty or improving way: sometimes people just want to take their kids to a Marvel film without spending too much money.

Earlier this week Peckhamplex announced that it would be closing temporarily, citing low levels of admissions – a local story that upset a devoted local clientele. But it was the subsequent news that Cineworld (along with Picturehouse, which it owns) was also temporarily closing its doors that brought the problems facing the industry to national attention.

With Boris Johnson urging people to go to the cinema but the government offering no extra subsidies, it’s understandable that most people focused on the possible economic outcomes of cinemas closing for good, the job losses and the knock-on effects on restaurants, bars, or commercial rents. Making the economic case is important (and I do think the government should help the industry financially) but I don’t think it’s sufficient: it seems like the current iteration of capitalism would take the end of everything that makes life bearable in its stride,

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