NPLs of banks hit N856.9bn in 2 years
The latest financial market report released by a Lagos based investment banking and research firm, Afrinvest West Africa Limited has clearly stated that Nigerian banks’ assets have depreciated in the last two years, with provisions for Non-Performing Loans (NPLs) hitting N856.9 billion.
It said provisioning for the NPLs, which rose 3.1 times from N280.4 billion in December 2014 to N856.9 billion last August, trimmed qualifying capital for mid to small-sized banks.
The high concentration of forex denominated loans has nominally increased risk weighted assets following pressure on forex rate, it said.
It further revealed that the NPL ratio increased from 2.9 per cent in 2014 to 11.7 per cent as of June 2016, with the forecast it could rise to 12.1 per cent as at December 2016.
The pressured portfolios of the banks include upstream oil and gas, general commerce, manufacturing and power sectors, which account for 48.1 per cent of total industry loan book.
The report also said FBN Holdings, Diamond Bank Plc, Heritage Bank Limited, First City Monument Bank Limited, Union Bank of Nigeria Plc, Unity Bank of Nigeria Plc and Skye Bank Plc would either require fresh capital or aggressively capitalise their earnings to stay within prudential limits in the next one year.
The Capital Adequacy Ratio (CAR) for banks that operate in Nigeria alone is 10 per cent, and is 15 per cent for lenders with offshore subsidiaries and 16 per cent for Systematically Important Banks (SIBs).
The report said: “In our estimation, seven banks- FBN Holdings, Diamond Bank of Nigeria Plc, Heritage Bank Limited, Unity Bank Plc, First City Monument Bank Limited, and Skye Bank Plc – would need to raise capital or aggressively capitalize earnings to stay within prudential limits in the next one year.”
According to the report, access to capital market for debt and equity financing remains tight due to the weak macroeconomic backdrop and investor sentiment even as profitability going forward will also be pressured as banks would be required to adopt International Financial Reporting Standards (IFRS) in reporting impairment charges from 2018.
