Zenith, Access Bank, Others Sustain NPL Ratio Below CBN’s Requirement

Nume Ekeghe

With the banking sector Non-Performing Loan (NPL) closing 2021 at 4.85 per cent, the likes of Zenith Bank Plc, Access bank Plc, United Bank for Africa Plc (UBA), among others have maintained a ratio below the Central Bank of Nigeria (CBN) regulatory requirement.

Other banks that maintained NPL ratio below CBN requirement are Sterling Bank Plc, FCMB Group Plc and Stanbic IBTC Holdings Plc.

Meanwhile, Guaranty Trust Holding Company Plc (GTCO) reported NPL above the threshold demanded by the banking regulatory body.

Analysts expressed that the NPL ratios in the banking sector remained stable in 2021, following the CBN’s forbearance for restructuring loan exposure to critical sectors.

Extract from the banks’ performance revealed that Sterling Bank in 2021 reported 0.70per cent NPL ratio as against 1.90 per cent reported in 2020, while Stanbic IBTC Holdings reported 2.10 per cent NPL in 2021 from 4.00 per cent reported in 2020.

The Chief Executive, Stanbic IBTC, Dr Demola Sogunle in a statement noted that the NPLs ratio moderated to 2.1per cent well within the acceptable limit of five per cent, as the total nonperforming loans decreased in value by 23per cent coupled with the responsible loan growth in line with the management conservative credit risk management practices.

UBA’s NPL dropped to 3.60 per cent from 4.70 per cent in 2020.

Speaking on its NPL decline performance, UBA’s Group Chief Financial Official, Ugo Nwaghodoh said: “This testifies to the quality of UBA’s loan portfolio even as the bank remains relentless in its resolve to drive down the Cost-to-Income ratio, which stood at 63.0per cent at the end of the year.”

However, Access Bank reported 4.00 per cent NPL ratio in 2021 from 4.30 per cent, while Zenith Bank reported 4.20 per cent NPL ratio in 2021 from 4.30 per cent in 2020.

In addition, GTCO reported a drop from its NPL to 6.04 per cent in 2021 from 6.39per cent in 2020. 

The bank in a presentation to investors/ analysts explained that: “The Group improved its asset quality with IFRS 9 Stage 3 loans closing at 6.04per cent in 2021 from 6.39per cent in 2020.

“The marginal increase in prudential NPLs from 6.86per cent to 6.92per cent was as a result of stress noted with certain exposures within the Hospitality, Individuals, Clubs, Co-operative Societies and Unions as the Obligors within these sectors were severely impacted by Covid-19.

“Downstream sector benefited from the N7.2billion write-off in FY 2021 as its NPLs improved to 8.6per cent in 2021 from 11per centin 2020. IFRS 9 Stage 3 loans closed at N113.9billion as at FY 2021 increasing by 2.2per cent from N111.5billion in 2020. Balance Sheet Impairment Allowance for Stage 3/Lifetime Credit Impaired exposures closed at N57.5 billion representing 50.5per cent coverage of Loans in this classification.

“In aggregate terms (including Regulatory Risk Reserves of N87.6billion), the Group has adequate coverage of 150.4per cent for its Stage 3 names/NPLs, this position is consistent with the Group’s plan to maintain 100 per cent coverage for its NPLs.”

Members of the Monetary Policy Committee of the CBN, had earlier applauded the management’s efforts in ensuring the continued downward trend of NPLs ratio, signifying improving conditions in the banking system

The MPC members also noted the sustained resilience of the banking system, following the progressive improvement in the NPLs ratio from 5.10 per cent in November 2021 to 4.85 per cent in December 2021- a first in a long time.

In her personal statement, a member, CBN Deputy Governor, Aishah Ahmad, said NPLs dropped to its lowest level in over a decade despite the increased lending by banks.

She noted that total credit had increased by N4.09 trillion between the end of December 2020 and December 2021 with significant growth in credit to manufacturing, General commerce and Oil & Gas sectors.

According to her, “Key industry aggregates also continued their year-on-year upward trajectory with total assets rising to N59.24trillion in December 2021 from N50.99 trillion in December 2020, while total deposits rose to N38.42 trillion from N32.21 trillion over the same period. 

“Total credit also increased by N4.09 trillion between end- December 2020 and end-December 2021 with significant growth in credit to manufacturing, General commerce and Oil & Gas sectors. 

“This impressive increase was achieved amidst continued decline in non-performing loans ratio from 5.10 per cent in November 2021 to 4.94 per cent in December 2021, 6 basis points below the regulatory benchmark for the first time in over a decade.”