A new global rating, the Lafferty Bank Quality Ratings (LBQR) released yesterday, has shown that Nigerian banks posted extremely strong quantitative indicators in 2014 which helped to push them high up the quality ranking among 100 banks in the world.
Lafferty Group is a major provider of knowledge services to the banking industry worldwide – from benchmarking research and Councils to professional education. Using quantitative and qualitative criteria and looking at areas such as strategy, culture, customer care, brand promise and financial performance, Lafferty Group used the banks’ annual reports to arrive at a quality rating, ranking them from one to five stars for each of 100 financial institutions in 28 countries.
“It must be noted that the ratings system is based on the annual report, and that 2014 is the latest available edition for most banks,” Michael Lafferty, chairman, Lafferty Group said while responding to questions shortly after the report was released.
He said the quantitative scores were very strong in 2014, adding that: “For example, all the Nigerian banks passed our profitability threshold in 2014, all passed our liquidity threshold, and all apart from one passed our demanding capitalisation threshold, one narrowly missed it”.
Lafferty further insisted that its findings show none of the banks have in place an independent customer loyalty measure; adding that they in general did very well in terms of treating their customers fairly. Nigerian banks did not score quite so highly under Lafferty qualitative metrics. None, for example were deemed to have the overall clarity of strategy required to surpass our threshold.
There are eight Nigerian banks in the list of 100 banks covered in the first issue of the journal. One of these, Sterling, got a four-star rating, while the rest got three stars. One area in which Nigeria stands out in global terms is in banking education. The CEOs of Access Bank, Fidelity Bank and Sterling Bank all had qualifications that were specific to banking.
“This is one of the factors that helped push Sterling into the four-star category, as was its heavy investment in IT, which helped to bring us to the conclusion that it had a forwardthinking culture”, Lafferty added.
He said: “Sterling scored very strongly on our quantitative metrics, such as earnings, capital, liquidity – but it must be borne in mind that we are using the figures in the 2014 annual report – so there will be some slippage here in the 2015 report. On our ‘softer metrics’, Sterling was given credit for the qualifications of its management, and, given its heavy investment in IT, was given credit for having a forward-looking culture.”
“While we do not include measures for non-performing loans, the current downturn in Nigeria will filter into these metrics for 2015, and are bound to drag them lower,” Michael added.