The quality of credits granted by the Primary Mortgage Banks (PMBs) in 2018 deteriorated significantly as Non-Performing Loans (NPLs) rose from ₦5.76 billion in 2017 to ₦18.63 billion in 2018, resulting in increase in the NPLs to Gross Loan Ratio from 3.70% in 2017 to 12.14% in 2018.
The 2018 annual report of the Nigeria Deposit Insurance Corporation (NDIC) stated that the ratio exceeded the regulatory threshold of 5 percent.
The PMBs gross earnings significantly dropped from ₦48.47 billion in 2017 to ₦29.80 billion in 2018. Operating Expenses marginally declined from ₦19.61 billion in 2017 to ₦17.67 billion in 2018. The subsector recorded a Loss of₦2.29 billion in 2018, against a profit of ₦19.87 billion in 2017 due to poor asset quality.
Consequently, return on asset (ROA) was negative 0.74% in 2018 against 6.12% in 2017 while return on equity (ROE) was negative 3.41% against 21.68% in 2017.
The reported indicated that the PMBs total deposits declined from ₦103.22 billion in 2017 to ₦98.91 billion in 2018. The PMBs’ average liquidity ratio was 102.53% in 2018, against 154.35% in 2017 and above the regulatory threshold. The Loans to Deposit Ratio increased from 150.75% in 2017 to 158.28% in 2018.
During the year, the PMBs encountered certain challenges which affected their ability to achieve their policy objectives.
These challenges include preference for Bank Placements in DMBs; weak capital base and difficulty in raising capital due to scarcity of long-term funds; perfection and Foreclosure Challenges; delay in accessing NHF funds; poor Corporate Governance and Risk Management Practices; and huge Stock of Non-Current Assets-Held-ForSale.
Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) will have the PMBs recapitalise within the next five years of his second term.
Emefiele was concerned that a lot of equity is currently tied down in mortgage assets which are today entirely cash backed.
“In our effort to support the growth of Nigeria’s real estate industry, the CBN will work in developing a framework that will enable banks to securitize mortgage loans, which can then be sold in the capital markets,” Emefiele said.
According to the NDIC report, the number of PMBs in operation was 38 in 2018. The South-West geo-political zone had the highest number of PMBs with 21 while the North Central had 9. Others accounted for the remaining eight.
The PMBs’ subsector shareholders’ fund declined to ₦67.19 billion as at December 31, 2018 from ₦91.65 billion in the corresponding period of 2017. The decline was largely associated with both the reduction in the number of PMBs in operation and the number that rendered their statutory returns in 2018.
In 2018, the operating licences of 6 PMBs were revoked by the CBN while some either converted to MFBs or were acquired. As at December, 2018 31, there were 38 PMBs in operation. This analysis according to the NDIC was based on the returns rendered by 27 PMBs.
HOPE MOSES-ASHIKE
