Kayode Tokede
Access Bank Plc and eight other banks’ provision for loan losses have marginally gained 0.17 per cent in the full year ended December 31, 2021, according to the result and accounts released by financial institutions on the Nigerian Exchange Limited (NGX).
Provision for loan losses or Impairment charges is the writing off of worthless goodwill and it refers to assets that are no longer of the same value as they were in a prior period.
The audited result and accounts compiled by THISDAY revealed that a total of N199.45 billion was recorded as impairment charges by nine banks, compared with N199.11 billion in the corresponding period of 2020.
THISDAY’s investigation showed that although the total value of impairment charges appreciated marginally in 2021, United Bank for Africa (UBA), Guaranty Trust Holding Company Plc (GTCO), Fidelity Bank plc, Wema Bank Plc and FCMB Group Plc actually recorded reduction, while Access Bank Plc, Zenith Bank Plc, Sterling Bank Plc, and Jaiz Bank Plc recorded increases.
Specifically, Access Bank, followed by Zenith Bank recorded higher provisions for impairment charges by value, while Wema Bank recorded a significant decline in its provisions for impairment charges in the period under review.
Access Bank’s impairment charges grew by 32.3 per cent to N83.2 billion in 2021 from N62.8 billion in 2020, while that of Zenith Bank closed 2021 at N59.9 billion from N39.5billion reported in 2020.
UBA on its part recorded N9.85billion net impairment charge for credit losses on loans in 2021, a decline of 56per cent from N22.44 billion reported in 2020.
As Sterling Bank credit loss expenses grew by 24 per cent to N9.8billion in 2021 from N7.91billion in 2020, GTCO reported 56 per cent decline in loan impairment charges to N8.53billion in 2021 from N19.57billion in 2020.
In a presentation to investors/analysts recently, GTCO stated that: “Laon impairment charges decreased by 56.4 per cent from N19.6billion in 2020 to N8.5billion in 2021 due to reserves built up from previous years, improvement in the outlook of macro-economic variables used in the predictive ECL impairment model amidst waning effect of the Cocid-19 pandemic and improvement in the quality of the loan book.”
Meanwhile, Sterling Bank made a provision of N2.429 billion, up from N1.844 billion in 2018, while that of UBA fell from N6.732 billion to N3.120 billion in 2019. Union Bank of Nigeria Plc had a write-back of N4.485 billion in 2019, compared with a charge of N4.625 billion in 2018.
FCMB Group recorded N15.24billion impairment charges in 2021, a decline of 28.3 per cent from N21.24billion in 2020 as another Tier- II bank, Wema Bank also reported 62 per cent decline in its net impairment loss on financial assets to N2.1 billion from N5.64billion in 2020.
In addition, Fidelity Bank recorded N7.04billion, down by 58 per cent from N16.9billion in 2020 just as Jaiz Bank increased its impairment charges to N3.73billion in 2021 from N3.03billion in 2020.
Commenting, the Managing Director, ARM Securities Limited, Mr. Rotimi Olubi explained that for 2021, the loan growth pace across the banking sector differed.
He added that: “For banks that were more aggressive with loan growth, impairment charges increased. However, for lenders with more conservative growth in the loan book, the rebound in major macroeconomic indicators helped reduce provision for loan losses by reducing the riskiness of the major sectors of the economy.”
Speaking, the Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, explained that: “It was the recovery of the economy and return to full operation of businesses after the lockdown that helped some of the business operators or managers to pay back their renegotiated loans, leading to some of the bank low provision for non-performing loan, while in some cases it was full recovery and no provision was made for bad loan.”
In his reaction, Head, Financial institutions, Agusto & Co, Mr. Ayokunle Olubunmi explained that some banks make provision for impairment before the pandemic, while some did not make provision due the quality of their loan books.
“Banks with significant increase in loan books are expected to make provision for loan losses. If a bank has a negative assumption of the macro-economy, it is expected to make provisions for loan losses,” he told THISDAY in a telephone interview.
According to analyst at PAC Holdings, Mr. Wole Adeyeye, financial institutions had recorded significant increase Inimpairment losses due to the pandemic of 2020, stressing that the ease of movement that led to improved business activities in 2021 forced some banks to reduce impairment losses for some businesses.
A member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Mike Obadan, a Professor of Economics, University of Benin in his personal statement at the January 24-25 meeting said: “In the past one year, the Nigerian economy has shown notable signs of recovery and resilience. The financial system demonstrated soundness, stability and resilience with the non-performing loans ratio falling below the prudential benchmark for the first time in recent history.
“The market for crude oil, upon which the economy depends heavily, rebounded strongly with high prices in the $70s or above. But the net positive impact on domestic revenue and foreign exchange has been very minimal because of subsisting production challenges and comatose local refineries. Fiscal performance is worrisome in the area of revenue generation and the attendant narrow fiscal space and public debt accumulation. Besides these are other issues which shape the direction of monetary policy.”
