First Bank of Nigeria Plc Headoffice
A report by Renaissance Capital (RenCap) has shown that lending to the oil and gas sector still forms a significant part of banks’ loan books.
The firm disclosed this in a report titled: “Nigerian banks: Loan Books under the Spotlight,” made available to THISDAY.
According to the report, at 35 per cent, First Bank of Nigeria Plc had the highest exposure to the oil and gas sector, while Fidelity had nine per cent.
The financial advisory firm added: “While most banks suggest this primarily relates to upstream exposure, we believe there must be significant exposure to downstream marketing within the sector, given the size of the oil and gas industry.
“The oil and gas sector is a significant part of banks’ loan books, ranging from nine per cent (Fidelity) to a high of 35 per cent (First Bank).”
It also revealed that other sectors that had continued to attract banking sector lending include the telecommunications; manufacturing; and general commerce.
“However, we know that exposure to these key sectors is not uniform across all nine banks under our coverage, with some banks clearly specialising in one sector relative to others. In our opinion, investors should be concerned when a sector’s contribution to non-performing loans (NPLs) far outweighs its weight in the loan book.
“This raises the question of whether there is one large single exposure within that sector that is driving the NPLs (concentration risk), or whether there is a gap in the bank’s skills base in that sector (poor credit and risk management),” RenCap advised.
But the report, which stated that banks’ balance sheet showed little resemblance to the real economy, pointed out that agriculture forms an insignificant part of the loan book, as it accounts for between one and five per cent of banks’ books.
“Manufacturing, despite the well-publicised bottlenecks in Nigeria, attracts a decent share of credit. For most banks, this sector ranges from nine to 10 per cent of the book, to about 20-25 per cent at the upper end.
“Telecommunications and information technology are also significant contributing sectors, accounting for up to 15 per cent of the book for some banks. General commerce, which normally refers to trade financing, is also a significant driver of credit extension, ranging from seven to 25 per cent of the book.
“Retail and consumer lending is insignificant for certain banks, but is surprisingly large for others, some of which we have not previously labelled as being focused on retail lending. The banks with significant retail lending exposure include First Bank (11 per cent), UBA (15 per cent), FCMB (11 per cent) and Fidelity (27 per cent),” it said.