Nine Banks’ Non-performing Loans Rise, Now N814bn

The aggregate Non-performing Loans of nine banks increased to N814.08bn in 2021, representing a 3.16 per cent increase from the N789.14bn reported.

The nine banks are Access Holdings Plc, Zenith Bank Plc, Wema Bank Plc, FCMB Group, Union Bank of Nigeria Plc and Stanbic IBTC Holdings Plc.

Others are Guaranty Trust Holding Plc, United Bank for Africa Plc, and Ecobank Nigeria.

However, with the banking sector’s NPL ratio closing 2021 at 4.85 per cent, some of the nine banks remained within the five per cent NPL ratio stipulated by the Central Bank of Nigeria.

Further findings also show that while some of the banks recorded an increase in their NPLs during the period under review, a number of them recorded a significant decline in their NPLs.

From the banks’ audited 2021 financial statements, findings showed that Access Holdings, Zenith Bank and GTCO reported the top three highest NPL by value among the nine banks, while Stanbic IBTC Holdings reported the lowest.

Access Bank in 2021 reported N181.5bn NPL by value, representing an increase of 4.3 per cent from the N161.2bn it recorded in 2020, while Zenith Bank’s NPL hit N146.8bn in 2021 from N125.2bn recorded in 2020, an increase of 17.3 per cent.

Zenith Bank, in a presentation to investors/analysts, explained that it adopted a complete and integrated approach to risk management that was driven from the Board of Directors’ level to the operational activities of the bank.

The bank further explained that its risk management was practiced as a collective responsibility coordinated by the risk control units and is properly segregated from the market-facing units to assure independence.

“There is a regular scan of the environment for threats and opportunities to improve industry knowledge and information that drives decision making. The group maintains a proactive approach to business and ensures an appropriate balance in its risk and reward objectives,” the bank explained.

Wema Bank, in 2021, reported N21.3bn NPL, an increase of 19.3 per cent from N19.3bn in 2020, while FCMB Group’s NPL rose to N45.93bn, representing a 61 per cent increase from N28.57bn it reported in 2020.

Others are Union Bank of Nigeria with N38.66bn NPL in 2021 from N29.45bn reported in 2020, as Stanbic IBTC Holdings reported 23.4 per cent drop in its NPL to N20.3bn in 2021 from N25.5bn in 2020.

Furthermore, GTCO’s NPL value rose by 2.3 per cent to N113.94bn in 2021 from N111.43bn reported in 2020, while UBA closed 2021 with N96.5bn NPL value from N120.08bn reported in 2020, indicating a significant reduction in its NPL.

In addition, ETI Nigeria reported N149.15bn NPL by value in 2021 from N167.41bn in 2020, a decline of 11 per cent.

Ecobank Nigeria reported NPL ratio of 16.6 per cent in 2021 from 19.6 per cent in 2020. Access Holdings closed 2021 with NPL ratio of 4.3 per cent as against four per cent in 2020, as Zenith Bank NPL ratio dropped to 4.2 per cent in 2021 from 4.3 per cent in 2020.

According to analysts, the NPL ratios in the banking sector remained stable in 2021, following the CBN’s forbearance for restructuring loan exposure to critical sectors.

Extract from the banks’ performance revealed that GTCO reported a drop in its NPL to 6.04 per cent in 2021 from 6.39per cent in 2020, while ETI Nigeria reported 16.30 NPL ratio in 2021 from 19.90 per cent in 2020.

GTCO in a presentation to investors/ analysts explained, “The Group improved its asset quality with IFRS 9 Stage 3 loans closing at 6.04 per cent in 2021 from 6.39 per cent in 2020.

“The marginal increase in prudential NPLs from 6.86 per cent to 6.92 per cent was as a result of stress noted with certain exposures within the hospitality, individuals, clubs, co-operative societies and unions as the obligors within these sectors were severely impacted by Covid-19.

“Downstream sector benefited from the N7.2bn write-off in FY 2021 as its NPLs improved to 8.6 per cent in 2021 from 11 per cent in 2020.

“IFRS 9 Stage 3 loans closed at N113.9bn as of FY 2021 increasing by 2.2 per cent from N111.5bn in 2020. Balance Sheet Impairment Allowance for Stage 3/Lifetime Credit Impaired exposures closed at N57.5bn representing 50.5 per cent coverage of loans in this classification.

“In aggregate terms (including Regulatory Risk Reserves of N87.6billion), the Group has adequate coverage of 150.4per cent for its Stage 3 names/NPLs, this position is consistent with the group’s plan to maintain 100 per cent coverage for its NPLs.”

UBA, Access Bank, and Zenith Bank, among other banks, reported NPL ratio below five per cent in the 2021 financial year.

For instance, UBA’s NPL dropped to 3.60 per cent from 4.70 per cent in 2020.

Speaking on its NPL decline performance, UBA’s Group Chief Financial Official, Ugo Nwaghodoh said, “This testifies to the quality of UBA’s loan portfolio even as the bank remains relentless in its resolve to drive down the Cost-to-Income ratio, which stood at 63.0 per cent at the end of the year.”

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.

Stanbic IBTC Holdings reported 2.10 per cent NPL in 2021 from 4.00 per cent reported in 2020.

The Chief Executive, Stanbic IBTC, Dr Demola Sogunle in a statement said the NPLs ratio moderated to 2.1 per cent, well within the acceptable limit of five per cent, as the total NPLs decreased in value by 23 per cent coupled with the responsible loan growth in line with the management conservative credit risk management practices.

In addition, Wema Bank reported NPL ratio declined from 4.9 per cent in 2020 to 4.5 per cent in 2021, as Union Bank of Nigeria’s NPL ratio moved from 4.00 per cent to 4.30per cent in 2021.

FCMB group closed 2021 with 4.10 per cent NPL ratio from 3.3 per cent in 2020.

Members of the Monetary Policy Committee of the CBN, thus, applauded the management’s efforts in ensuring the continued downward trend of NPLs ratio, signifying improving conditions in the banking system

The MPC members also noted the sustained resilience of the banking system, following the progressive improvement in the NPLs ratio from 5.10 per cent in November 2021 to 4.85 per cent in December 2021- a first in a long time.

In her personal statement, a member, CBN Deputy Governor, Aishah Ahmad, said NPLs dropped to its lowest level in over a decade despite the increased lending by banks.

She noted that total credit had increased by N4.09tn between the end of December 2020 and December 2021 with significant growth in credit to manufacturing, general commerce, and oil and gas sectors.

She said, “Key industry aggregates also continued their year-on-year upward trajectory with total assets rising to N59.24tn in December 2021 from N50.99tn in December 2020, while total deposits rose to N38.42tn from N32.21tn over the same period.

“Total credit also increased by N4.09tn between end- December 2020 and end-December 2021 with significant growth in credit to manufacturing, general commerce, and oil & gas sectors.

“This impressive increase was achieved amidst continued decline in non-performing loans ratio from 5.10 per cent in November 2021 to 4.94 per cent in December 2021, 6 basis points below the regulatory benchmark for the first time in over a decade.”