Q1’23: Big banks grow loan books by 18% amid rising interest rate
Nigeria’s largest lenders banks have seen steady growth in customer loans in the first quarter of 2023, BusinessDay’s findings have shown.
The latest earnings report shows all the largest lenders grew their risk-weighted assets, as non-interest sources of income also bolstered revenue.
The combined loans and advances of ten banks rose by 18 percent to N25.3 trillion in the first quarter of 2023 from N21.5 trillion in the corresponding period of 2022, according to data gathered by BusinessDay.
“The implication of borrowing at the current interest rate is negative from an interest expense standpoint and it also has some impact on the Nigerian economy because the high-interest rate environment will lead to passing the cost increase to consumers,” said Tajudeen Ibrahim, director of research and strategy at ChapelHill Denham.
The banks surveyed are Ecobank, Access Bank, Zenith Bank, United Bank for Africa, Fidelity Bank, Guaranty Trust Holding Company (GTCO), Stanbic IBTC Holdings, First City Monument Bank (FCMB), Union Bank and Wema Bank.
“Due to rising interest rates, businesses pass the high cost of borrowing on to their consumers which is partly what is fuelling inflation,” Ibrahim said.
The Central Bank of Nigeria (CBN) increased interest rate three more times last year from the first time in May 2022 by a total of 400 basis points to 17 percent and twice this year to 17.5 percent and most recently 18 percent.
According to CBN, the hike in interest rate for the first time in May 2022 after six years was to fight the bullish inflation for ten straight months last year and this year a third consecutive increase.
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“Clearly, the increase in interest rate has widened the journey farther away from the preferred single-digit interest rate regime. It will spur upward review of existing lending rates which will drive costs Northward, resulting in higher prices of goods, low sales and enormous volume of inventory of unsold products,” Segun Ajayi-Kadir, director-general, Manufacturers Association of Nigeria.
To him, the manufacturing sector is visibly struggling to survive numerous strangulating fiscal and monetary policy measures and reforms.
The DG said manufacturers were hopeful that the stringent conditionalities for accessing available development funding windows with the CBN would be relaxed to improve the flow of long-term loans to the manufacturing sector at single-digit interest rates.
Ecobank gave the sum of N5.04 trillion in loans to customers which amounted to N5.04 trillion in the first quarter of 2023, a 30 percent increase from N3.87 trillion in the first quarter of 2022.
Access Bank’s loans to customers also stood at N5.04 trillion in the first quarter of 2023, a 17.5 percent increase from N4.29 trillion in the first quarter of 2022.
Zenith Bank reported N3.55 trillion as loan to customers in the first quarter of 2023, 12 percent decline from N4.03 trillion in the similar period of 2022.
United Bank for Africa loans to customers rose to N3.30 trillion in the first quarter of 2023, 15 percent increase from N2.87 trillion in the same period of 2022.
Fidelity Bank recorded 18 percent growth in loans to customers which amounted to N2.16 trillion in the first quarter of 2023 from N1.83 trillion in the first quarter of 2022.
Guaranty Trust Holding Company rose to N1.86 trillion in the first quarter of 2023, 8 percent increase from N1.72 trillion in the first quarter of 2022.
Stanbic IBTC Holdings’ loan to customers rose to N1.20 trillion, 22.4 percent from N0.98 trillion in the reviewed period.
First City Monument Bank recorded an 8.2 percent increase in loan to customers to N1.19 trillion in the first quarter of 2022 from N1.10 trillion in the first quarter of 2021.
Union Bank’s loan to customers grew 15 percent to N982 billion in the first quarter of 2023 from N853 billion in the first quarter of 2022.
Wema Bank’s loan to customers increased by 21 percent to N524 billion in the first quarter of 2023 from N434 billion in the first quarter of 2022.