Nigerian Deposit Money Banks were less aggressive in their lending activities across sectors last year, evidenced by the fact that the combined loan book of 12 lenders contracted some 6 percent, and eight of them slightly lowered their exposure to real estate sector, on the average.
The percentage allocation of gross loans and advances extended by eight lenders – Access Bank, United Bank for Africa (UBA), First City Monument Bank (FCMB), Zenith Bank, Fidelity Bank, Guaranty Trust Bank (GTB), Stanbic IBTC and Union Bank – to real estate sector, which has been in recession for 12 consecutive quarters, averaged 6.6 percent in 2018.
This therefore indicates a marginal 90 basis points decline compared with 7.5 percent in 2017.
In absolute terms, real estate got N623.3 billion out of the combined N9.84 trillion extended by these lenders across sectors in 2018. This represents about N60 billion dip over N683.3 billion dissipated in 2017.
“This reflects that developers and real estate investors are not borrowing from the banks as before, in the sense that they are going to external sources to get funds for their projects,” Rotimi Steven, a broker at International Real Estate Partners, says.
“Banks are risk-averse knowing that the sector is downturn. They are not willing to take more risks as before, and their requirements for granting loans is quite outrageous,” Steven states.
Individual-bank analysis reveals that tier-1 lenders Access, Zenith, and mid-tier Fidelity elevated their exposure by 2.2 percent, 0.58 percent and 0.02 percent points, respectively, in 2018, while UBA, FCMB, GTBank and Stanbic IBTC reduced lending to the sector. Union Bank’s allocation to real estate activities remained stuck at 6.7 percent.
Nigeria’s biggest lender by market capitalisation, GTBank, dissipated N68 billion out of its N1.36 trillion gross loans to real estate in 2018, compared with N106.4 billion in the previous year. In percent terms, loan allocation to the sector dips 200 basis points to 5 percent in 2018.
Zenith Bank, Nigeria’s largest lender by total assets, raised its exposure to real estate sector by some 400 basis points to 5.6 percent in 2018. However, in money terms, allocation to the sector dips N3.9 billion, owing to a double-digit decline of 10.2 percent in its loan book to N2.02 trillion.
The new entity, Access Bank, which is now Nigeria’s biggest lender by customer base, elevated its exposure to real estate sector both in percent and money terms. Allocation to the sector rose to some 220 basis points in 2018 to 10.1 percent, which indicates N52.4 billion surge to N215.1 billion in the same year.
Mid-sized lenders, FCMB and Stanbic IBTC lowered their percentage loan allocation to the sector by 4.2 percent and 1.1 percent points, respectively.
However, FCMB directed N65.4 billion, which is N28 billion less than N93.2 billion lent in 2017, while Stanbic IBTC saw lending to the sector rising N78 million to N43.6 billion, despite dip in percent terms, owing to 13.6 percent surge in its loan book.
One of Nigeria’s oldest lenders, Union Bank reduced lending to the sector by N2.76 billion, even though allocation in percentage terms stuck at 6.7 percent, as its gross loans dropped 7.4 percent to N519.7 billion.
Fidelity Bank grew lending to the sector both in percent terms (0.02%) and value term (N7bn) to 3.3 percent and N31.7 billion, respectively.
Same with UBA, that lowered funds to real estate activities by 0.03 percent points to 6 percent in 2018, and N47.4 billion dips to N51.6 billion in 2018.
