Amid Tough Operating Environment, 10 Banks’ NPL Hits N811.7bn

Kayode Tokede

Following persistent macro economic challenges, 10 leading banks in the country reported N811.7 billion Non-Performing Loans (NPL) by value out of the N21.87 trillion gross loans granted to customers and other financial institutions in 2022, THISDAY investigation has revealed.  

The 10 banks in 2021 reported N724.45 billion NPL, about N18.36 trillion of their gross loans to customers and other financial institutions. 

The banks are:  Access Holdings Plc, Zenith Bank Plc, Guaranty Trust Holding Company Plc (GTCO), and United Bank for Africa (UBA), all Tier-1 banks in Nigeria.

Others include: Fidelity Bank Plc, Wema Bank Plc, FCMB group Plc, Union Bank of Nigeria Plc, Stanbic IBTC Holdings Plc, and Sterling Bank Plc.

THISDAY checks revealed that sectors such as General Commerce, Oil & gas, and manufacturing contributed to the huge NPL in 2022, trigged by inflation rate, among other economic challenges over the years.

Nigeria was not immune to the impact of the Russia-Ukraine war as inflation especially food and energy prices spiked in the year under review. The Central Bank of Nigeria (CBN) raised interest rates multiple times to slow down accelerating inflation and this forced some banks to restructure their loans.

A breakdown revealed that Access Holdings in 2022 reported N176.9 billion NPL from N181.5 billion in 2021, while Zenith Bank declared N177.3 billion NPL in 20222 from N146.1 billion in 2021.

As GTCO reported a decline in its NPL to N102.37 billion in 2022 from N113.9 milllion in 2021, UBA saw its NPL increasing to N106.64 billion in 2022 from N102.04 billion in 2021.

In the year under review, Fidelity bank reported N64.6billion NPL as against N50.17 billion in corresponding year. FCMB group, however, closed 2022 with N45.01 billion NPL compared with N44.68 billion in 2021, while Union Bank                declared N40.04 billion NPL in 2022 from N38.66 billion in 2021. 

Others include: Wema Bank with N32.8 billion NPL in 2022 from N21.3 billion in 20221; Stanbic IBTC recorded N29.4 billion NPL in 2022 from N20.3 billion in 2021 and Sterling Bank closed 2022 with N36.63 billion NPL as against N5.77 billion in reported in 2021.

Despite mixed performance in NPL by value, some Tier-1 banks NPL ratio was below the 5 per cent threshold of the CBN in 2022.

FCMB Group, and Wema Bank in the Tier-2 banks category reported NPL ratio above apex bank requirement.

The CBN had disclosed that average NPL ratio in the banking sector closed 2022 at 4.2 per cent from 4.9 per cent in 2021, attributable to write-offs, restructuring of facilities, Global Standing Instruction (GSI) and sound credit risk management by banks.

However, in 2022, FCMB group reported 6.60 per cent NPL ratio as against 4.10 per cent in 2021. Wema Bank in the same year announced 6.08 per cent NPL ratio as against 4.90 per cent  reported in the corresponding year.

The management of Wema Bank said, increase of 1.18 per cent in total NPL ratio driven by the decision to be more prudent in managing some assets, stressing that reduction in NPLs across some sectors including general commerce, transport & storage, and manufacturing sectors.

GTCO, the only Tier-1 bank with NPL ratio above the CBN requirement as UBA and Access Holdings maintained NPL ratio below three per cent. 

GTCO announced 5.19 per cent NPL ratio in 2022 from 6.04 per cent in 2021.

GTCO in a presentation said, “The Group’s IFRS 9 Stage 3 loans closed at 5.2 per cent in 2022 from 6.04 per cent in 2021. With Retail and Others emerged as Sectors with the highest NPL – 22.1 per cent and 20.5 per cent. IFRS 9 Stage 3 Loans improved to N102.8 billion in 2022 from N113.9 billion in 2021, primarily driven by the deleveraging of Ghana and Kenya’s Loan books via the realization of pledged collaterals.

“IFRS 9 Balance Sheet Impairment Allowance for Stage 3/Lifetime Credit Impaired exposures closed at N54.9 billion representing 53.4 per cent coverage of Loans in this classification. In aggregate terms (including Regulatory Risk Reserves of N93.9 billion), the Group has adequate coverage of 175.5 per cent for its IFRS 9 Stage 3 loans /NPLs. This position is consistent with the Group’s plan to maintain 100 per cent coverage of its NPLs.”

UBA and Access Holdings closed 2022 with 3.10 per cent NPL ratio respectively as Zenith Bank closed the year under review with 4.30 per cent NPL ratio as against 4.20 per cent reported in 2021.  

Access Holdings with four per cent NPL ratio in 2021 hinged the decline in 2022 on proactive post – disbursement monitoring and robust risk management practices.

With the increase in its NPL ratio, the management of Zenith bank explained that it has adopted a holistic and integrated approach to risk management and therefore, brings all risks together under one or a limited number of oversight functions.

NPL coverage ratio of Zenith Bank, thus, closed 2022 at 115.9 per cent from 114.4 per cent reported in 2021.

Meanwhile, stakeholders have called on banks managers to take caution lending to real sector.

The Deputy Governor, Economic Policy, CBN, Kingsley Obiora in his personal statement during the first Monetary Policy Committee (MPC) in January 2023 said the   total gross credit increased by N5.14 trillion or 20.93 per cent between the end of December 2021 and December 2022, from N24.57 trillion to N29.72 trillion, due to the increase in the industry funding base as well as the CBN’s directive on LDR, which has encouraged banks to increase lending to the real sector of the economy, and business strategy and competition.

He hinted that, “The increase in credit to the key sectors of the economy is expected to bolster aggregate demand and promote economic growth, job creation, and poverty alleviation.”

He expressed, “Overall, policymakers need to keep an eye on pre-existing macroeconomic imbalances and headwinds. The global economic slowdown (especially in the United States, the Euro Area and China), the Russian-Ukraine war, geopolitical fragmentation, weaker currencies in many EMDEs, and rising external debt are all weighing on domestic investment and further exacerbating the existing domestic headwinds.

“With China re-opening after three years of zero Covid policy, these headwinds are, however, expected to moderate and improve global growth, but could also be a risk to global inflation. Domestically, although oil production has improved, it is still below the OPEC allocation quota of about 1.8 mbpd due to high production costs, oil theft and pipeline vandalism. Low oil production in the face of high oil prices continues to reduce fiscal space, with consequences for external debt and foreign reserves accretion.”