The third quarter (Q3) 2016 “Credit Conditions Survey Report” has revealed increase in secured and unsecured credit availability to households, small businesses and corporate entities, compared with the previous quarter.
The report by the Central Bank of Nigeria (CBN) also showed that spread on overall secured and unsecured lending to households widened in Q3, 2016 and was expected to remain widened in the next quarter.
It stated that lenders also reported that households’ demand for house purchase lending, unsecured credit card lending and unsecured overdraft/personal loans all increased in Q3, 2016 and were expected to increase in the next quarter.
According to the report, the demand for corporate lending in Q3, 2016 increased across all firm sizes and was expected to increase further in the next quarter. Corporate loans performance to all businesses deteriorated in Q3, 2016.
In addition, the report showed that in Q3 2016 relative to the previous quarter, lenders reported an increase in the availability of secured credit to households.
“Lenders noted that brighter economic outlook and changing appetite for risk were major factors behind the increase. The availability of secured credit was however expected to decrease in the next quarter with the banks’ “market share objectives” as the major contributory factor.
“Due to lenders stance on tightening the credit scoring criteria in Q3 2016 there was a decline in the proportion of loan applications approved in the quarter. Though lenders expect the credit scoring criteria to remain tightened in the next quarter, they expect the proportion of households’ loan applications approved in Q4 2016 to increase.
“Maximum Loan to Value (LTV) ratios remained flat in the current and next quarter.
Lenders expressed their unwillingness to lend at low LTV ratios (75% or less) in both the current and next quarters. Similarly, they expressed unwillingness to lend at high LTV (more than 75%) in the current quarter and the next quarter (Question 10). The average credit quality on new secured lending improved in Q3 2016 and was expected to improve further in Q4 2016.
“Lenders reported that the overall spreads on secured lending rates to households relative to MPR widened in Q3 2016 and was expected to further widen in the next quarter. Widened spreads were reported for prime, buy to let and other lending in Q3 2016 and were expected to widen further in the next quarter,” it added.
Households demand for lending for house purchase increased in Q3 2016 and was expected to further increase in the next quarter. Of the total demand, increase in households demand for prime, buy to let and other lending were reported, but were expected to decrease in the next quarter except demand for prime lending.
Households demand for consumer loans, mortgage/remortgaging and small businesses rose in Q3 2016 and were expected to rise further in Q4 2016. Secured loan performance, as measured by default rates worsened in Q3 2016 and but was expected to improve in Q4 2016. Loss given default deteriorated in the current quarter but was expected to improve in the next quarter.
Also, the availability of unsecured credit provided to households rose in the current quarter and was expected to further rise in the next quarter. Lenders reported increased appetite for risk and banks’ market share objectives as factors that contributed to the increase in Q3 2016.
Due to Lenders’ resolve to tighten the credit scoring criteria for total unsecured loan applications in Q3 2016, the proportion of approved total loan applications for households decreased in the quarter. Lenders expect to loosen the credit scoring criteria in the next quarter, but are still of the opinion that the total loans applications to be approved in Q4 2016 will further decrease.
Similarly, lenders tightened the credit scoring criteria for granting credit card loan applications and expect the proportion of approved credit card applications to decrease in Q4 2016.
Lenders resolve to tighten the credit scoring criteria in granting overdraft/personal loan applications in the current quarter decreased the proportion of approved household’s overdraft/personal loan applications in the current quarter.
Lenders reported that spreads on credit card lending widened in Q3 2016 and was expected to widen further in the next quarter. Similarly, it revealed that spreads on unsecured overdrafts/personal loans on approved new loan applications widened in the current quarter and was expected to widen further in the next quarter.
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