Oil Price Slump: Banks Face Financial Distress

Falling oil price which is
expected to hit the economy harder in this year will make some already week banks to run into financial distress, it has been learnt.
Financial distress is a term in Corporate Finance used to indicate a condition when promises to creditors of a company or bank are broken or honoured with difficulty.
Investigations by our correspondent shows that financial distress if it can not be relieved, can lead to bankruptcy.
Top bankers who spoke to our correspondent said yesterday that some financial institutions have started seeing signs that the year would be very difficult to the falling oil prices.
The development they said could make profits in some banks to tumble within the third and fourth quarters of 2015.
Analysts had said that a number of regulatory measures aimed at stabilizsing the country’s economy would also make it difficult for banks to make higher profit this year.
The Managing Director, Afrinvest West Africa Limited, an investment advisory firm, Mr Ike Chioke said reduction in banks’ fee income would make the year a turbulent one for the financial institutions.
According to him, the CBN has also come up with measures to control the nation’s foreign exchange.
He said all the measures would take away the fee incomes that the banks would ordinarily have enjoyed.
The Managing Director, Asset Management Corporation of Nigeria (AMCON), Mr Mustafa Chike-Obi, recently told The Tide source that falling oil prices would cause serious economic headwind this year and that banks would be forced to record a very significant increase in non-performing loans in their banks.