Despite Recession, Banking Sector Loans to Customers Rise to N16.372trn

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Trading floor of the Nigeria Stock Exchange

• Industry profit after tax rises to N452bn
• Banks bar power Discos over bad debts

Obinna Chima in Lagos and Chineme Okafor in Abuja

The audited results of 2016 for 14 banks quoted on the Nigerian Stock Exchange (NSE) have shown a 22 per cent increase in total loans and advances to their customers from N13.315 trillion in 2015, to N16.372 trillion in the year under review.

The financial results of the banks reviewed by THISDAY showed deliberate efforts by the banks, mostly to support operators in the real sector of the economy.
Similarly, the total profit after tax (PAT) of the 14 banks rose marginally to N452 billion in 2016, up from the N442.451 billion recorded the previous year; just as their total gross earnings climbed to N4.007 trillion in the reviewed year, as against the N3.441 trillion recorded in 2015.

The banks’ results reviewed were Zenith Bank Plc, Access Bank, FBN Holdings, United Bank for Africa Plc (UBA), Guaranty Trust Bank Plc, First City Monument Bank, Unity Bank, Wema Bank and Union Bank.
Others included Fidelity Bank, Sterling Bank, Stanbic IBTC Holdings, Diamond Bank and Ecobank Transnational Incorporated (ETI).

But one of the listed banks, Skye Bank, had notified the Nigerian Stock Exchange (NSE) that its results would be released next week.
A breakdown of the figures, however, showed that while FBN Holdings’ loans and advances increased to N2.084 trillion in the reviewed year, up from N1.817 trillion the previous year; Zenith Bank Plc’s financial statement also showed the bank gave out N2.289 trillion as loans and advances to its customers, compared with the N1.989 trillion recorded the previous year.

Similarly, while UBA loaned customers N1.505 trillion in 2016, up from N1.037 trillion the previous year; Access Bank recorded N1.809 trillion in 2016, from N1.368 trillion in 2015; GT Bank recorded N1.589 trillion in 2016, up from N1.372 trillion in 2015; ETI also posted N2.824 trillion in 2016, from N2.232 trillion in 2015; Diamond Bank Plc also posted N995.334 billion as customer loans and advances in 2016, up from N763.635 billion the previous year, while Fidelity Bank also posted customer loans and advances of N718 billion in 2016, higher than the N578 billion it gave out in the previous year.

In terms of profit after tax, the breakdown also showed that while GT Bank recorded N132.281 billion in 2016, higher than the N99.437 billion posted the previous year; Zenith Bank earned PAT of N129.652 billion in 2016, from N105.663 billion in the previous year; UBA’s PAT was N72.264 billion in 2016, from N59.654 billion the previous year; Access Bank’s PAT increased to N71.439 billion in 2016, from N65.869 billion; while FBN Holdings’ posted PAT of N17.141 billion, from N15.539 billion.

The International Monetary Fund (IMF) recently affirmed that Nigeria will this year recover from economic recession, projecting that the nation’s economy will grow by 0.8 per cent in 2017.
Citing increased crude oil production due to security improvement, the IMF stated that Nigeria’s Gross Domestic Product (GDP) will grow by 0.8 per cent in 2017 and 2.3 per cent in 2018.
The Group Managing Director/Chief Executive Officer, Access Bank Plc, Mr. Herbert Wigwe, expressed optimism that developments in the macro economy would be positive.
Also, the Managing Director, FBN Holdings, Mr. U.K Eke, described 2016 as a year characterised by significant uncertainty in the operating environment.

“We expect an improved economic environment through 2017 and are confident that the foundations we have put in place will drive improved financial performance and consequently enhance shareholders’ returns,” he said.
Also, the Chief Executive Officer, Diamond Bank, Mr. Uzoma Dozie, said in the months ahead, the bank would continue to deploy new technologies and digital applications to drive financial inclusion and convenient banking amidst a decline in the pace of economic activities and weak economic fundamentals.
The bank will also continue to deepen its retail strategy to mop up low cost fund, expand its credit creation structure and increase market share in all market segments, he added.

Banks Bar Power Discos from Loans

Meanwhile, commercial banks have reportedly barred the 11 electricity distribution companies (Discos) in Nigeria’s power sector from obtaining financial facilities to support their operations, the Association of Nigerian Electricity Distributors (ANED) has disclosed.
ANED said in a statement in Abuja on Monday, that the banks took this decision on the back of a N152.16 billion financial package from the Central Bank of Nigeria (CBN) allegedly written against their accounts, but which they have received only N49 billion.

ANED’s Director of Research and Advocacy, Mr. Sunday Oduntan, who signed the statement, stated that the loan was from the CBN-backed Nigeria Electricity Market Stabilisation Fund (NEMSF) worth N213 billion.
The financial package was designed by the central bank to settle the debts incurred by the electricity market within the interim rule periods, as well as legacy gas supply debts owed gas suppliers by the defunct Power Holding Company of Nigeria (PHCN) but now transferred to the Nigerian Electricity Liabilities Management Company (NELMCO).

According to Oduntan, the breakdown of the fund’s disbursements so far shows that N58.45 billion which is about 27.8 per cent was designated for the Discos, while N152.16 billion (72.3 per cent) was for the power generation companies (Gencos), gas suppliers and other service providers.
He stated that only N49 billion has been received by some Discos from the N120 billion the CBN had disbursed since it commenced in 2015.

Oduntan, also claimed that the N152.16 billion written in the name of the Discos were not for them, but that it was in their financial books.
“The debt encumbrance is a significant impediment to the Discos’ ability to borrow money to finance their capital investment, and their financing of the entire value chain,” said Oduntan.
He also spoke about the recent N701.9 billion approved for the Nigeria Bulk Electricity Trading Plc (NBET) to pay the Gencos for power that would be supplied from January 2017 to 2019, saying that if the retail end of the market would be ignored by the government in its intervention, the N701 billion may not sustain the electricity market.

“It is a good first step towards resolving the market liquidity challenge and ensuring that the upstream operators are not financially distressed, but it is not a complete solution to the problem.
“As long as the retail end of the value chain continues to under-recover its cost, any possibility of the government recovering its intervention or fixing the ailments of the sector is an illusory one,” Oduntan stated.
ANED also claimed that the market still has an outstanding shortfalls of over N800 billion which it added must be addressed urgently to ensure that the N701 billion loan to the NBET would be recovered.

  • benedict chindi

    The figures being quoted above don’t tell us much. I think Thisday’s economic analyst will do well to adjust these figures (nominal values) for inflation so readers can get a true picture of the performance of the banking sector and to an extent, the larger economy. Inflation has been well over 17% for nearly a year (now pushing 18%), and this fact reflects in everything else including value of Loans to customers, interest rate on those loans, banks profits etc.

    Beyond the above however, I believe it is about time either or all of the CBN, the national assembly, NLC and TUC begin to critically examine the wage structure of Nigeria’s commercial banks. Most of these profits (i.e the part not distributed as shareholder dividends and retained earnings) are spent on bonuses for the GMs and Executive Directors, with almost nothing going to mid and junior level managers and officers.

    A typical example is Zenith bank, whose MD wrote, signed and sent a stinker to staff two months ago following record (nominal) profits recorded in the just published 2016 audited accounts, and the anticipation (by staff) that perhaps this year will be different. The stinker was withdrawn in less than 24 hours (without explanation or apologies), but the damage had been done.

    Someone needs to ask the banks the last time salaries were increased (both for professional level and support staff); someone also needs to look into the issue of executive remunerations (salaries, bonuses and share option) and its widening gap with professional level remunerations at least from the start of bank consolidation in 2004 till date. Many things are hidden away as part of management accounts, but it has to be the duty of someone to hold people accountable.