Kayode Tokede
Following write-offs, restructuring of facilities, Global Standing Instruction (GSI) and credit risk management as a result of economic challenges, a total of 11 banks recorded N1.67 trillion non-performing loans (NPL) during the first half (H1) of 2023, an increase of 37 per cent from N1.22 trillion reported in the full year ended December 31, 2022.
The banks include; Zenith Bank Plc, Access Holdings Plc, Guaranty Trust Bank Holding Plc (GTCO), FBN Holdings Plc Ecobank Transnational Incorporated (ETI), and United Bank for Africa Plc (UBA).
Other are: FCMB Group Plc, Wema Bank Plc, Stanbic IBTC Holdings Plc, Sterling Financial Holdings and Fidelity Bank Plc.
In the period under review, the dollar trended weaker from the historic highs witnessed in 2022 sending ripples through currency markets around the world. For most African Countries, currency depreciation contributed to higher inflation and public debt figures as well as a deteriorated loan position.
Central Banks around the world, including Africa continued to hike interest rates in a bid to effectively manage inflation as most of the African economies investigated by THISDAY continued to experience monetary tightening in reaction to persistent inflation.
THISDAY analysis of the banks’ results revealed that FCMB Group, Wema Bank and ETI reported NPL ratio above five per cent regulatory requirement of the CBN, while GTCO declared 4.60 per cent NPL ratio in H1 2023 from 5.19 per cent reported in 2022 full year.
According to CBN, the industry NPLs had improved from 5.1 per cent as of June 2022 to 4.1 per cent in June 2023, and was below the five per cent supervisory requirement.
ETI, a an-African financial institution reported 5.5 per cent NPL ratio in H1 2023 from 5.20 per cent in 2022, bringing its NPL by value to N512.12 billion as of June 30, 2023 from N299.7 billion reported in 2022.
ETI’s net loans & advances to customers stood at N9.31 trillion as of June 2023, an increase of 62 per cent from N5.76 trillion in 2022FY.
According to ETI, its NPLs of $612million were one per cent lower Year-on-Year (YoY) (increased 44 per cent at CC), and an NPL ratio of 5.5 per cent.
With about 4.3 per cent NPL ratio and N5.26 trillion gross loans & advances, FBN Holdings reported N226.24 billion NPL in H1 2023 from N204.29billion reported in 2022. FBN Holdings is the second highest financial institution with NPL by value after ETI.
The oldest financial institution declared 5.4 per cent NPL ratio and N3.79 trillion gross loans & advances in the 2022 financial year.
Other Tier-1 financial institutions: Access Holdings, Zenith Bank, UBA and GTCO closed June 2023 with N218.9 billion, N209.86billion, N154.53 billion and N115.29 billion NPL by value respectively.
According to UBA, its asset quality remained strong and resilient, as the total non-credit impaired facilities i e Stages 1& 2 accounted for 96.7 per cent of the Group’s total loan portfolio as of H1 2023 from 96.9 per cent in 2022 financial year.
The lender in a presentation said its NPL remains within regulatory limit, ranging between 3.1 per cent and 3.3 per cent.
“Notwithstanding the moderate NPL ratio, the group’s NPL coverage ratio as of June 2023 stood at 187 per cent. This has remained well over 100 per cent over the period,” UBA added in a presentation to investors/ analysts.
Also, GTCO in its presentation to investors/ analysts explained that, “The Group’s IFRS 9 Stage 3 loans closed at 4.6 per cent (Bank: 3.6per cent) in H1-2023 from 5.2per cent (Bank:4.7 per cent) in 2022. With Individuals and Others emerging as sectors with the highest NPLs i.e., 20.9 per cent and 30.96 per cent respectively.
“IFRS 9 Stage 3 loans grew marginally to N115.3billion in H1-2023 from N102.8billion in 2022, primarily driven by exchange rate impact as the Group continued to deleverage in Ghana and Kenya and carried out derecognition of fully provided facilities in the Nigerian book.”
In addition, FCMB group declared N52.66billion NPL value as of H1 2023 from N45.01billion in 2022, while Wema Bank including its local and foreign NPL by value stood at N33.07 billion as of H1 2023 from N32.77 billion reported in 2022.
FCMB group NPL ratio stood at 5.20per cent as of Junne 30, 2023 from 6.60 per cent in 2022, above the regulatory requirement.
In the same vein, Wema bank declared 5.12 per cent NPL as of June 30, 2023 from 6.08 per cent reported in 2022.
“Reduction of 0.96 per cent in NPL ratio driven by improvements in loan management tactics. Reduction in NPLs across some sectors including general commerce, transport & storage, and manufacturing sectors, ”said Wema bank in a presentation obtained by THISDAY.
The Chief Risk Officer, Wema Bank, Sylvanus Eneche said the lender is cautious and taken some steps in mitigating raising NPL.
According to him, “We’ve taken some very proactive steps. In sectors where we see some challenges, and in some of those cases, for instance, some portion of our commercial businesses that we see that there is going to be significant challenge. We’ve taken a very proactive step of recognizing that there’s some significant impairment. But then again, I would say that you would notice that the value of our aggregate NPLs has not moved much. And that’s simply because we have had some good recoveries.
“Again, this year, there was the initial lull in business as a result of the elections and of course, as a result of the Naira redesign. But I believe that business has actually rebounded much faster than we expected after the elections. And of course, some of the issues that we have expected on the basis of our worst case scenario, stress testing have not come to pass. So, we expect that you continue to see that our coverage ratio continues to improve.”
Meanwhile, banks in the country have continued to write off non-performing loans. This came as lenders also continued to debit the bank accounts of recalcitrant debtors in other to reduce the volume of non-performing loans.
The former Deputy Governor, at the CBN, Obiora Kingsley who corroborated this in a statement during the July Monetary Policy Committee (MPC) meeting said, the continuous decline in NPL was attributable to write-offs, restructuring of facilities, Global Standing Instruction (GSI) and sound credit risk management.
According to him, “Total assets of the banking industry grew by N30.92 trillion or 47.21 per cent between June 2022 and June 2023, largely driven by the effects of new FX policy.
“As a result, total gross credit increased by N10.75 trillion or 39.73 per cent between the end of June 2022 and the end of June 2023 due to the increase in the industry funding base, the CBN’s directive on Loan-to-Deposit Ratio (LDR), business strategy and competition, and changes in valuation of FX denominated loans due to operational changes in the FX market. The credit growth was largely recorded in oil and gas, manufacturing, general commerce, and government.”
