9 banks provide N191.47bn for bad loans

By our Correspondent

Nine Money Deposit Banks in the country provide N191.47 billion loan impairment charges for the financial year ended December 31, 2015

The same banks loan impairment charges up by nearly 80 per cent from N106.6 billion provision in 2014, an indication of Nigeria banks prudent loan portfolio management.

This provision made by the nine banks is on the heels of macroeconomic challenges due to dwindling crude oil prices, and recognition of impairment charges on some specific commercial banking businesses.

Our correspondent analysis of the results of banks so far released to The Exchange in 2015 indicated that Ecobank Group tops the chart in loan impairment charges with a 137 per cent from N44.4billion ($266.96 million) in 2014 to N105.2 billion ($532 million) in 2015.

Group Chief Executive Officer, Ecobank Group, Ade Ayeyemi said: “Our 2015 results were disappointing. We did a comprehensive review of our processes and portfolio leading to elevated impairment charges in the fourth quarter. Impairment losses were significantly increased by $265 million to $532 million. This was unacceptable to us, and we have taken drastic steps to address asset quality and strengthen our processes.

Union Bank of Nigeria Plc followed with a growth of 106 per cent in loan impairment charges from N4.8 billion to N9.9 billion.

While commenting on the increased loan impairment charges, the Chief Financial Officer, Union Bank of Nigeria, Mr. Oyinkan Adewale, said, “We have taken a prudent approach to our loan impairment provisions, due to a worsening operating environment and believe that there is an opportunity for recoveries as the economy improves”.

Closely followed is Guaranty Trust Bank Plc with a growth rate of 74.8 per cent to N12.4 billion from N7.1 billion recorded in 2014.

United Bank for Africa Plc came third when its loans provisioning rose by 58.7 per cent to N5.05 billion, from N3.18 billion in the corresponding period of 2014.

First City Moment Bank loan  impairment charges rose by 41per cent from N10.6 billion to N15 billion while Fidelity Bank Plc, witnessed an increase of 33.9 per cent in impairment charges, which rose from N4.3 billion to N5.76 billion in 2015.

The management of FCMB noted that the growth in loan impairment charges was due to an exceptional charge of N5.4 billion on a legacy receivable asset and a significant loan impairment of N6.2billion related to a customer, both reported in the third quarter of 2015.

Also, the Chief Executive Officer, Fidelity Bank Plc, Nnamdi Okonkwo noted that the increase in impairments was due to a more prudent approach adopted with respect to a special regulatory provision which was charged directly to the Profit and Loss (P&L), causing decline in profit of the bank.

Similarly, Access Bank Plc and Zenith Bank Plc recorded a growth of 22.1 per cent and 20 per cent in impairment charges respectively.

Access Bank impairment charges moved from N11.65 billion to N14 billion while Zenith Bank recorded N15.67 billion in 2015 as against N13.06 billion in 2014.

Sterling Bank, of the eight banks, has the lowest growth in loan impairment charges. The bank recorded 10.3 per cent growth in impairment from N7.4 billion to N8.15 billion recorded in 2015.

Since  the major banking reform embarked upon by the Central Bank of Nigeria(CBN) in 2009/2010 in the banking industry, which led to improved risk management strategies by banks, it was expected that impairment charges that have also affected the profitability of banks.

However, the operating environment continues to throw up challenges that have made banks to raise their level of provisioning for bad loans.