First Bank of Nigeria profit drops by two-thirds

First Bank of Nigeria Plc, the West African nation’s largest lender, said annual profit slumped by two-thirds as the global economic crisis reduced the value of its investments.

Net income dropped to 12.6 billion naira ($85.2 million) in the 12 months through March, from 36.7 billion naira a year earlier, the Lagos-based bank said in a statement distributed by the Nigerian Stock Exchange today. Revenue climbed 40 percent to 218.3 billion naira, it said.

The decline in profit was a result of the “diminution in value of investments occasioned by the situation in the capital market,” the company said in the statement. It didn’t elaborate.

First Bank’s results come after Eurasia Group, a New York- based research company, said in May that banks in Nigeria may have as much as $10 billion of toxic assets. The bad debt is partly the result of at least 1 trillion naira ($6.8 billion) of so-called margin loans used by speculators to buy shares as equities soared almost 13-fold since 2000, according to Bank of America Corp. Nigeria’s All Share Index tumbled 70 percent in the 12 months through March.

A provision of 26.11 billion naira was made for bad debts by the company.

First Bank shares advanced the daily limit of 5 percent to 21 naira on the bourse today, according to exchange data.

The company declared a dividend of 1.35 naira per share and said it will award one bonus share for every six held.

“It is a very courageous report on the part of the bank,” said David Andori, general manager of Lagos-based Lambeth Trust & Investments Ltd., in an interview. “They made a very large provision, which diminished their profit, but still they went ahead to pay a dividend.”

Source: Bloomberg