2 Tier-1 Banks Reports NPL Ratio Above 5% CBN Threshold

Kayode Tokede

Two leading financial institutions, Ecobank Nigeria and FBN Holdings Plc have reported Non-Performing Loan (NPL) above the Central Bank of Nigeria (CBN)’s 5 per cent threshold for commercial bank operating in the country.

Analysis of the banks’ results for the half year (H1) ended June 30, 2022, showed that while they reported a significant decline in NPL ratio, their Non-Performing Loan remain above the CBN threshold.

A breakdown showed that Ecobank Nigeria reported 15.50 per cent in NPL ratio in H1 2022 from 16.30 per cent reported in full year ended December 31, 2021, while FBN Holdings reported 5.4 per cent in NPL ratio from 7.2 per cent in 2021 FY.

The Ecobank group’s NPL ratio, however, dropped to 6.2 per cent in H1 2022 from 7.4 per cent in H1 2021.

The Group in a presentation stated that, “NPL ratio improved to 6.2 per cent compared to 7.4 per cent a year ago and proactively improved the NPL coverage ratio to 113.5per cent. In addition, our allowance for impairment charges includes a central macro-overlay buffer of $206m for any future downside risks.”

Analysis of other banks’ half year results revealed that FCMB Group Plc, Union Bank of Nigeria Plc, Sterling Bank Plc and Wema Bank Plc have NPL ratio below five per cent.

For instance, FCMB Group closed H1 2022 with NPL ratio of 4.60per cent from 3.30 reported in 2021, while Union Bank of Nigeria’s NPL rose from 4.30 per cent in 2021 FY to 4.40 per cent in H1 2022.

As Sterling Bank’s NPL ratio moved to 1.1 per cent in H1 2022 from 0.7 per cent in 2021, Wema bank announced 3.1 per cent NPL ratio in H1 2022 from 4.9 per cent reported in 2021 FY.

Wema Bank in a presentation to investors/analysts stated that the reduction in NPL ratio is on the back of an increase in collections and recoveries, as well as a growth in loan book

The bank said: “Total non-performing loans for the period was N14.3billion, a 32 per cent decline from the FY 2021 position. General commerce had the largest share at 51 per cent (H1 2022: 34per cent)

“Local currency NPLs experienced a 29 per cent drop to close the six months period at N14.25billion. NPLs declined y-o-y for these sectors: construction, general, manufacturing, admin and support, real estate activities, water supply, sewage, waste management, professional, scientific, and technical activities.”

The CBN had maintained that NPL ratio in the banking sector stood at 5.3 per cent in April 2022, compared with its prudential limit of five per cent, reflecting sustained stability in the banking system, though there remains a need to bring this down to the prudential limit.

NPL was at 5.89 per cent at the end of April 2021.

Deputy Governor, Economic Policy, CBN, Kingsley Obiora in a statement noted that the improvement reflected recoveries, restructuring of facilities and sound management practices by Other Depository Corporations (ODCs).