For a sector already under pressure as a result of a sluggish economy, a challenging operating environment, and increased competitive intensity— when the coronavirus pandemic crashed global oil prices and sent Nigeria’s currency, the naira, reeling in 2020, many feared the worst for country’s biggest banks.
The year re-echo fears of 2016 as many investors struggled to get decently priced loans in Nigerian banks and their plight is not helped when a bank is risk-averse because it already has lots of bad loans on its books.
However, by 2021, most of the big banks — including Access Bank, Zenith Bank and United Bank for Africa — had diversified their loan books and maintained a Non-Performing Loan (NPL) ratio below the Central Bank of Nigeria (CBN) regulatory requirement.
The percent non-performing loans in Nigeria reflects the health of the banking system.
A higher percent of such loans shows that banks have difficulty collecting interest and principal on their credits. That may lead to less profits for the banks in Nigeria and, possibly, bank closures.
Extract from the banks’ performance revealed Access Bank reported 4.00 per cent NPL ratio in 2021 from 4.30 per cent, while Zenith Bank reported 4.20 per cent NPL ratio in 2021 from 4.30 per cent in 2020.
In addition, GTCO reported a drop from its NPL to 6.04 per cent in 2021 from 6.39per cent in 2020.
“The decline in NPLs can be attributed to the full reopening of the economy and pickup in business activity level,”Ayodeji Ebo, head, retail investment, Chapel Hill Denham, said.
Most businesses that have restructured their loans would have started servicing as at when due, he said.
The Nigerian banking sector bad loans known as non-performing loans (NPLs) dropped to 4.8 percent in December 2021, the lowest since the third quarter of 2015 when it stood at 5.11 percent, according to data gleaned from the Central Bank of Nigeria (CBN).
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This implies that the current sector’s NPL level is lower than the prudential maximum threshold of 5.0 percent.
First Bank recorded the highest NPL ratio in four years with 24.7 percent in 2018 which dropped to 9.9 percent, 7.7 percent, 7.2 percent in the period of 2019, 2020 and the available Q3 ‘2021 respectively.
First bank non-performing loans (NPL) coverage increased to 53.3 percent in 2021 from 48 percent in 2020.
The highest NPL coverage recorded in 4 years was in 2018 where First bank recorded 78.3 percent which declined to 47.5 percent in 2019.
The top five sectors by NPL distribution by sector includes Agriculture,
General Commerce, Oil & Gas – Upstream, Real Estate and General with 17.9 percent, 13.4 percent, 6.1 percent, 5.8 percent and 4 percent respectively.
GTco
GTCO ranked second with an NPL ratio which stood at 6.04 percent in 2021, a drop from 6.39 percent in 2020. GTco recorded 6.53 percent, 7.3 percent in 2019 and 2020 respectively.
GTco’s NPL coverage increased to 150.4 percent in 2021 from 128.7 percent in 2020. It recorded 105.1 percent, 126.4 percent in 2018 and 2019 respectively.
Analysis by BusinessDay showed NPL by Industry recorded the top five sectors which includes Others (27.4%), Individual (21.2%), General commerce (11.3%), Construction & Real Estate (8.8%) and Oil and Gas- Midstream (8.8%) in 2021.
Zenith bank
Zenith bank ranked third with NPL ratio dropping to 4.2 percent in 2021 from 4.3 percent in 2020, the bank recorded 4.3 percent, 5 percent in 2019 and 2018 respectively.
The bank’s NPL coverage stood at 144.4 percent in 2021, an increase from 113.9 percent in 2020. NPL coverage dropped to 148.2 percent in 2019 from 160 percent in 2018.
Analysis by BusinessDay showed the top five sectors include Oil and Gas- Upstream(18.3%), Government (14.5%), General commerce (13.7%), Other Manufacturing (11%) and Agriculture (6.5%).
Access bank ranked fourth with NPL ratio which stood at 4 percent in 2021, from 4.3 percent in 2020. Access bank’s NPL ratio jumped to 5.8 percent in 2019 from 2.5 percent in 2018.
Access bank’s NPL jumps 12.6 percent to N181.5 billion, from N161.2 billion in 2020.
NPL coverage dropped to 86.5 percent in 2021 from 121.6 percent in 2020. Access bank NPL coverage recorded 160 percent, 112 percent in 2018 and 2019.
The top five sectors by NPL distribution by sector includes Agriculture (14.5%), Manufacturing – Others (13%), Transportation and Storage (9.7%), Food Manufacturing (8.6%), Oil and Gas – Downstream (8.2%).
United Bank for Africa (UBA) NPL coverage has been increasing yearly to 134 percent in 2021 from 123 percent in 2020. UBA recorded 122 percent, 79 percent in 2019 and 2018 respectively.
NPL ratio dropped to 3.6 percent in 2021 compared to 4.7 percent in 2020, the highest NPL ratio recorded was in 2018 with 6.5 percent which dipped to 5.3 percent in 2019.
“This testifies to the quality of UBA’s loan portfolio. The bank remains relentless in its resolve to drive down the Cost-to-Income ratio, which stood at 63.0percent at the end of the year,” UBA’s Group Chief Financial Official, Ugo Nwaghodoh said.
The top five sectors by NPL distribution by sector includes General (31%), General Commerce (29%), Oil and Gas (21%), Construction & Real Estate (12%) and Manufacturing, Transportation & Storage and others (2%) in December 2021.
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