GTCO, ETI, Zenith Bank, 9 Others’ Non-Performing Loans Up 3.9% N1.5trn in H1

GTCO, ETI, Zenith Bank, 9 Others’ Non-Performing Loans Up 3.9% N1.5trn in H1

Kayode Tokede

The value of 12 banks Non-Performing Loans (NPL) increased by 3.9 per cent to N1.15trillion as of half year (H1) ended June 30, 2022 from N1.109 trillion reported in 2021 financial year, investigations by THISDAY has revealed.

Despite severe macroeconomic challenges, the 12 banks in the period under review granted a whopping sum of N27.31 trillion as net loans and advances to customers, representing an increase of 10.7 per cent from N24.67trillion reported in 2021.

The 12 banks are:  Access Holdings Plc, Zenith Bank Plc, Guaranty Trust Holding Company Plc (GTCO), United Bank for Africa Plc (UBA), FBN Holdings and Ecobank Transnational Incorporated (ETI).

Others are: Wema Bank Plc, FCMB Group, Union Bank of Nigeria Plc, Fidelity Bank Plc, Stanbic IBTC Holdings Plc and Sterling Bank Plc.

THISDAY can report that with the banking sector’s NPL ratio closing H1 2022 at 4.95 per cent compared with 5.7 per cent in H1 2021, a total of nine banks reported NPL ratio below the five per cent ratio stipulated by the Central Bank of Nigeria (CBN).

Meanwhile, analysts believe severe domestic and foreign macroeconomic challenges impacted on banks loans to customers, leading to hike in the banking sector bad loans in the period under review.

Commenting, the Vice President, Highcap Securities Limited, Mr. David Adnori explained that most Tier-1 Nigerian banks employed cautious approach in lending to customers over uncertainty in domestic and global economy post Covid-19 pandemic lockdown.

He added that post-election year is always a difficult year lending to customers, given uncertainty surrounding the outcome of the election.

On the growth of 10.7 per cent in gross loans to customers, he said the Nigerian banking industry showed resilience in the period under review as loan portfolio increased despite weak economy and regulatory constraints.

He said notwithstanding the prevailing global supply constraints, the Russian-Ukraine crisis and insecurity challenges in Nigeria, the decline in NPL and growth in gross loans indicated that more banks now have a better understanding of the macroeconomic headwinds.

THISDAY analysis of the banks’ financial statements for the half year ended June 30, 2022 revealed that ETI, Access Holdings, Zenith Bank reported highest NPL by value among the 12 banks, while Wema Bank and Sterling Bank reported the lowest NPL by value.

With about 3.01 per cent decline in net loans & advances to customers to N3.94 trillion as of June 30, 2022, ETI’s NPL dropped to N244.22billion as of June 30, 2022 from N251.8billion reported in 2021.

The Pan-African bank show its NPL ratio remaining unchanged at 6.2 per cent from 2021 FY as it has improved significantly compared to the 7.4per cent in the H1 2021.

Access Holdings, however, reported drop in NPL ratio to 3.7 per cent as of June 30, 2022 from four per cent reported in 2021 to positioned its NPL to N185.8billion in H1 2022 from N181.5billion reported in 2021.

Access Holdings attributed the decline in NPL ratio on proactive monitoring and robust risk management practices.

General Commerce with 17.2 per cent as of June 30, 2022 from 17.1 per cent in 2021 contributed highly to NPL distribution by sector reported by Access Holdings, followed by 13.5 per cent in manufacturing- others as of June 2022 from 13.4 per cent in 2021.

The significant increase of N4.92trillion loans to customers as of June 30, 2022 from N4.45trillion reported in 2021 impacted on NPL in the period under review.

Zenith Bank reported N159.6billion NPL as of June 30, 2022 from N146.8billion in 2021FY as its NPL ratio moved from 4.19 per cent as of June 30, 2022 from 4.35 per cent reported in 2021.

On its risk management strategy, Zenith Bank in a presentation to investors/analysts highlighted that, “The Group adopts a complete and integrated approach to risk management that is driven from the Board level to the operational activities of the bank. Risk management is practiced as a collective responsibility coordinated by the risk control units and is properly segregated from the market facing units to assure independence.

“The process is governed by well-defined policies and procedures that are subjected to continuous review and are clearly communicated across the group. There is a regular scan of the environment for threats and opportunities to improve industry knowledge and information that drives decision-making.”

The bank said maintained a proactive approach to business and ensures an appropriate balance in its risk and reward objectives.

As FBN Holdings reported N155.63billion NPL as of June 30 from N135.24billion in 2021, GTCO closed June 30, 2022 with N118.6billion NPL from N113.94billion in 2021.

According to GTCO, its Group’s IFRS 9 Stage 3 loans closed at 6.2per cent in H1 2022 from six per cent in 2021.

The bank in a presentation explained that the marginal increase in NPL 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 are yet to fully recover from impact of COVID 19.

The bank added that, “IFRS 9 Stage 3 loans closed at N118.5billion in H1 2022 increasing by 4.06per cent from N113.9billion as at FY 2021. Balance Sheet Impairment Allowance for Stage 3/Lifetime Credit Impaired exposures closed at N84.2billion representing 71.1per cent coverage of Loans in this classification.

“In aggregate terms (including Regulatory Risk Reserves of N93.9billion) the Group has adequate coverage of 150.3per cent for its IFRS 9 Stage 3 loans /NPLs, this position is consistent with the Group’s plan to maintain 100per cent coverage for its NPLs.”

In addition to leading banks NPL performance, UBA with N2.95trillion net loans accounted for N97.4billion NPL as of June 30, 2022 from N102.04billion in 2021 when it closed with N2.83trillion net loans to customers.

The UBA stated that its prudent underwriting standards, and proactive credit monitoring resulted in a further drop in NPL ratio to 3.3per cent in H1 2022 from 3.6 per cent in 2021. 

“Well diversified loan book across strategic economic sectors translating to moderate credit risk,” the bank also explained in a presentation to analysts/Investors.

UBA’s Group Managing Director/ Chief Executive Officer, Mr. Oliver Alawuba in a statement said 2022 showed initial signs of recovery of economies across the globe, despite continued COVID-induced supply-chain disruptions, stressing that geopolitical challenges including the Russia and Ukraine conflict, resulted in escalation of global commodity prices, particularly those of grains and crude oil, which have taken a toll on several economies.

Further findings revealed that Wema bank announced N14.3billion NPL as of June 30, 2022 from  N21.3billion in 2021, while Stanbic IBTC Holdings reported N25.28billion NPL as of June 30, ,2022  from N20.39billion in 2021.

According to Wema Bank, general commerce had the largest share at 51 per cent in the period under review as against 34 per cent reported in corresponding period of 2021.

“Local currency NPLs experienced a 29 per cent drop to close the six months period at N14.25billion NPLs declined y-o-y for these sectors: construction, general, manufacturing, admin and support, real estate activities, water supply, sewage, waste management, professional, scientific, and technical activities. The reduction in NPLs is on the back of an increase in collections and recoveries, as well as a growth in loan book,” the bank explained.

With the mixed performance in NPL ratio, members of Monetary Policy Committee (MPC) of the CBN have expressed satisfaction over banks resilience performance in lending to real sector amid challenges.

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