‘Efficiency to drive AMCON NPL recovery’

An Afrinvest report on the 2013 financial statement of AMCON says that looking forward, a streamlined process of loan recovery would enable AMCON speedily recover the cost of its intervention in the banking industry.

An analysis of AMCON’s non-performing loans (NPL) portfolio revealed a skewed distribution of loans to the oil & gas sector (27.2%), followed by the general commerce sector (18.5%). Capital markets, manufacturing and finance & insurance contributed 17.9%, 6.2% and 5.5%, respectively.

In addition, AMCON’s portfolio revealed a total of 12,383 loans made up of individuals, corporates and government entities.

Approximately, 6.7 percent of the total loans acquired were loans valued at N10.0 million and below. Another 1,992 loans of N100 million to N1.0 billion in size account for 16.0 percent of the portfolio value while 433 loans of between N1.0 billion to N10.0 billion on size account for 36.0 percent of the portfolio.

Lastly, 65 loans all in excess of N10.0 billion represented 41.5 percent of the portfolio.

“From the above, it is clear that AMCON could achieve cost savings by focusing on the top 2,500 loans in its portfolio which account for 93.0 percent of the value, while engaging third parties in the recovery of the balance,” says the Afrinvest report.

“This will provide a more efficient approach in the recovery process”, it said.

AMCON had previously indicated that it fully intends to pursue avenues that support the viability of debtors’ businesses to facilitate the recovery process.

This includes the evaluation and restructuring of loans to ease the payment burdens that fit into AMCON’s timelines. As such, liquidation is considered as a last resort.

In addition, it is expected that the financing cost would moderate over the years as bond exposure is paid down. Financing cost constitutes 65.2% of total cost.

The financial statements of AMCON showed improved efficiency as operating expense declined by 159.1 percent from N205 billion in 2012 to N121 billion in 2013.

Furthermore, both top line and bottom line showed improvements with a loss of N627 billion in FY 2013, a decline from the loss recorded in 2011 of N2.37 trillion and in 2012 of N702 billion.

AMCON is currently funded by a combination of loan recoveries, contribution from the CBN, sales of assets pledged and a sinking fund that currently constitutes a 0.5 percent levy of banks’ total assets and a 0.33 percent of off-balance sheet items annually.