Global rating agency, Moody’s, has predicted a stable outlook for Nigerian banks this year.
Moody’s in a report released this morning said the outlook for Nigerian banks remains “stable on resilient capital buffers and stable deposit bases”
Peter Mushangwe, Analyst at Moody’s, said banks’ challenges from assets risk and should ease in 2020 as the economy improves.
According to Mushangwe, loan quality pressures will ease but remain banks’ main weakness. Nonperforming loans (NPLs) will decline to 7percent-8percent in the next 12-18 months from 11.7percent at the end of 2018 – still at a high level. Higher oil prices will constrain new NPL formation while high loan-loss reserves will allow banks to write off some of their bad debts. These credit positives will be moderated by lingering risks from high loan concentrations and high delinquency levels
Figures from the National Bureau of Statistics showed that NPLs of Nigerian banks tanked for three quarters to bottom at 10.83percent in the first quarter of 2019.
Gbolahan Ologunro equity analyst at Lagos-based CSL Stockbrokers said improving economy and a relatively stable oil prices are the major drivers of improved asset quality of banks which have reflected in their NPLs.
Moody’s says it expects Nigeria’s real GDP to expand 2.3percent in 2019 and 2.8percent in 2020, up from 1.9percent last year, but well below the level required to improve living standards. Lending growth will recover in the second half of the year following a contraction in 2018, but it will remain subdued and will not appreciably boost banking revenue.
Analysis of the total loan portfolio of Nigerian banks in four months to April 2019 reveal that lenders have 30 percent exposure to the oil and gas sector, the highest across all sectors.
Banks’ gross loans rose marginally by 0.85 percent quarter-on-quarter to N15.48 trillion in the first three months of 2019, compared with N15.35 trillion in the previous quarter, while non-performing loans dip 6.5 percent to N1.67 trillion in the review quarter.
Analysis of the total loan portfolio of Nigerian banks in four months to April 2019 revealed that lenders have 30 percent exposure to the oil and gas sector, the highest across all sectors.
Bad loans in the oil & gas sector totaled N4.7 trillion, with foreign currency accounting (N2.8trn) for 60 percent share and naira component (N1.9trn) taking the remaining 40 percent.
Banks’ have 15 percent exposure to the manufacturing sector, and 9 percent to the public sector. Total bad loans in both sectors stood at N2.2 trillion and N1.4 trillion respectively.
Despite the improvement in NPL, the sluggish growth of the economy has failed to convince the banks to increase lending to boost real sector growth.
“Banks are risk-averse towards the broader economy and are channelling a large chunk of consumer deposit to take advantage of attractive yields in fixed income market,’’ Fola Abimbola, equity analyst said.
Big banks received deposits worth N18.7 trillion from customers in the first quarter of 2019, the highest in five years BusinessDay findings showed.
OLUFIKAYO OWOEYE
