Analysts say only sound economic reforms can accelerate bank lending

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Banks could accelerate credit extended to the private sector if policymakers implement reforms that would drive economic growth. Analysts say it is practically difficult to dissuade lenders away from parking their money in high-yielding government securities. They add that yields will continue to be attractive so long as the central bank (CBN) continues its aggressive…

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Banks’ bad loans near 3-year low on stronger oil price, economic pick-up

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Bad loans of Nigerian banks fell to its lowest level since the second quarter of 2016 when a crash in global oil prices wreaked havoc on Africa’s largest economy and sent lenders’ book bad as debtors were unable to settle their obligations.

Data from the Abuja-based National Bureau of Statistics (NBS) showed that non-performing loans of the Nigerian banking industry fell for three straight quarters to bottom at 10.83 percent in the first quarter of 2019.

Gbolohan Ologunro, equity analyst at Lagos-based CSL Stockbrokers cited improving economy and oil price rebound as major drivers of improved asset quality of banks which have reflected in the decline in NPL.

“Since Nigeria exited the recession, the economy has recorded continued-albeit slow- growth which has enabled corporates to repay their obligations,” Ologunro told BusinessDay, adding that the recovery in oil price between 2017 and 2018 was a stronger driver of the NPL decline given lenders’ high exposure to the oil sector.

“Some banks to have recorded significant pay down from their customers,” the equity analyst said.

Banks’ gross loans rose marginally by 0.85 percent quarter-on-quarter to N15.48 trillion in the first three months of 2019, compared with N15.35 trillion in the previous quarter, while non-performing loans dip 6.5 percent to N1.67 trillion in the review quarter.

Analysis of the total loan portfolio of Nigerian banks in four months to April 2019 revealed that lenders have 30 percent exposure to the oil and gas sector, the highest across all sectors.

Bad loans in the oil & gas sector totaled N4.7 trillion, with foreign currency accounting (N2.8trn) for 60 percent share and naira component (N1.9trn) taking the remaining 40 percent.

Banks’ have 15 percent exposure to the manufacturing sector, and 9 percent to the public sector. Total bad loans in … Read More...

A snap shot of Banks’ Q1 profit

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Banks have recorded an uptick in profit, but the restriction the Central Bank of Nigeria (CBN) is about to place on government securities could cast a pall on future earnings.

Fees and commission income, reduction in impairment charge, and foreign exchange gains help compensate for a slow growth in gross earnings.

The cumulative net income of 12 largest lenders that have released first quarter results increased by 16.50 percent to N223.96 billion from N192.24 billion as at March 2017.

Drilling down the figures shows Access Bank recorded the fastest increases in profit, but Stanbic IBTC Holdings and Union Bank fell of the cliff as bottom lines shrank.

Lenders future earnings could be under threat as CBN moves to restrict their appetite for Federal Government Securities.

The Abuja based bank is set to roll out a comprehensive framework that would discourage the current high appetite by commercial lenders for government securities and encourage increased credit flow to the poorly-served productive sectors of the economy.

“The truth is that according to our own regulation, there is a particular minimum percentage of government securities that the banks must invest in to remain liquid, but again, we have observed unfortunately increasingly that banks rather than focusing on granting credit to the private sector tend to direct their focus mainly in buying government securities,” Emefiele said.

“The Monetary Policy Committee has frowned on that, and has directed the management of the CBN to put in place policies or regulations that will restrict the banks from unlimited access to government securities,” he said.

The first quarter financial statement of Nigerian banks shows profit has been growing at a slow pace while interest income on loans and advances and treasury bills shrank.

Analysts say it is practically difficult to turn on the tap … Read More...