finance & economy

With Manufacturing, General Commerce and Communication Sectors Contributing 22%, Eight Banks’ NPL Rise to N626.5bn

September 20, 2021

Following the impact of the Covid-19 lockdown in 2020 that almost crippled economies around the world, the H1 2021 results submitted to the Nigerian Exchange Limited (NGX) by eight banks has revealed increase in Non-Performing Loan (NPL).

Analysis of the H1 2021 results showed that Zenith Bank Plc, FCMB Group, among six other banks reported N626.5biillion Non-Performing Loans as at June 30 2021, an increase of 3.4 per cent from N605.9 billion reported in full year ended December 31, 2020.

Other banks are Access Bank Plc, FBN Holdings Plc, Fidelity bank plc, Union bank of Nigeria, Stanbic IBTC Holdings and Sterling Bank plc.
The National Bureau of Statistics (NBS) had reported N1.23trillion NPLs in the banking sector in 2020 from N1.06trillion in 2019.

Of the N626.5billion NPLs reported as at June 30, 2021 by value, Access Bank contributed about 25.7 per cent, while Zenith Bank contributed 21.5 per cent.
Further analysis of the results revealed that sectors such as Oil & Gas, Agriculture, general commerce and manufacturing are key contributing factors to these banks NPL this year.

Although Access Bank closed H1 2021 with 4.3 per cent NPL ratio (December 2020: 4.3 per cent), increasing gross loans and advances to customers of about N4.1trillion as at June 30, 2021 from N3.8 trillion in 2020 FY, its NPL by value rose to N178.6billion as at June 30, 2021 from N161.2billion reported in 2020 financial year (FY).

The bank’s result showed that manufacturing and general commerce sectors contributed about 22per cent and 19 per cent to the bank’s NPL by distribution as at June 30, 2021.

The Chief Executive Officer, Access Bank, Herbert Wigwe had while commenting on the results expressed that: “To further enhance our operating efficiency and ensure strong returns on invested capital, we will bring the best of our group assets, specifically our digital banking capabilities that support individuals and businesses, enhance financial inclusion, and deliver the benefits of a strong network effect across our enlarged Group.

“Throughout the pandemic, we have been able to demonstrate our ability and willingness to support our customers, our communities, and our colleagues. As the outlook improves, and as business returns to a new normal, we will continue to support our communities in order to stimulate growth and create new opportunities.
“To accomplish our vision to be the World’s Most Respected African Bank, we are working together across the Group on the back of our robust balance sheet, increased retail momentum and efficiency, ”he said.

However, Nigeria’s largest bank by net asset, Zenith Bank reported N134.85billion NPL by value as at June 30, 2021 from N125.2billion reported in 2020 FY.
The lender report an NPL ratio of 4.51 per cent as of June 2021 compared to 4.29 per cent in 2020, mostly due to an increase in oil and gas NPL.
Zenith Bank has a diverse loan portfolio of N2.99 trillion out of which Upstream and Downstream oil and gas numbers are 18.4per cent and 4.9per cent respectively, totalling 23.3 per cent of total loan portfolio.

The bank informed investors it diversified its portfolios over the last one year to support asset quality.
The bank reported 29.9per cent of its NPLs are oil and gas-related loans, out of which its oil and gas loans amount to about N40 billion as at June 30, 2021.
However, Zenith Bank’s oil and gas NPLs of about N40 billion means just 5.9per cent of total oil and gas loans are bad, a slight increase from the same period in 2020. Oil and gas loans as a percentage of NPLs were 29.87per cent in 2020 or N37.3 billion.

The bank also reported that foreign currency loans as of June 2021 was $2.8 billion, a drop from $3.1 billion reported same period in 2020 FY.
Again, oil and gas-related loans make up its largest chunk with about $1.41billion, though down from $1.61 billion a year earlier.
Zenith Bank has also restructured about 37per cent of its oil and gas loans.
General Commerce and Communication also contributed 24.30 per cent and 24.13 per cent to the bank’s NPL as at June 30, 2021 as against 24.70 per cent and 24.27 per cent recorded in 2020 FY.

The bank said, it is engaging customers in key sectors of the economy to better understand their current challenges and provide effective and bespoke actions to alleviate their hardships while preserving shareholders’ funds.
The bank explained further that: “Providing critical support to our loan customers to help them navigate through the challenges posed by the pandemic.”
On its part, FBN Holdings NPL by value increased to N182.74 billion as at June 30, 2021 from N170.71billion reported in 2020 FY.

The group with 7.2 per cent NPL ratio closed June 30, 2021 with N2.54trillion gross Customer loans & advances as against N2.22trillion it reported in 2020 FY. The Holdings, thus, closed 2020 FY with 7.7 NPL ratio.
Meanwhile, Stanbic IBTC Holdings reported N25.47billion NPL by value as at June 30, 2021 from N26.49billion in 2020 FY, while FCMB group grew its NPL by value to N32.21billion as at June 30, 2021 from N28.6billion reported in 2020 FY.
FCMB explained that growth in NPL was largely driven by slight deterioration in individual’s loan book and interest on existing NPLs.

Further finding revealed that Stanbic IBTC Holdings reported NPL ratio of 3.2 per cent and N790.6billion gross loans and advances to customers as at June 30, 2021 against NPL ratio of 4.0 per cent and N655.3 billion gross loans and advances to customers reported in 2020 FY.
Construction & real estate and Agriculture sector accounted for 14.4 per cent and 12.6 per cent of Stanbic IBTC NPL ratio as at June 30, 2021 from 15.4 per cent in 2020 FY respectively.

Stanbic IBTC restructured loans as at June 30, 2021 was N62.66billion with Covid-19 related accounting for N50.97billion while Non Covid-19 related was N11.69billion.
In addition, foreign currency NPL by value contribution was N5.1billion or 20 per cent of the total NPL by value as at June 30, 2021 while local currency contributed N20.4billion or 80 per cent of the N25.47billion NPL by value of Stanbic IBTC.

With NPL ratio of 2.8 per cent and N1.6trillion gross loans and advances to customers, Fidelity Bank reported N44.97billion NPL by value as at June 30, 2021. The strongest Tier-2 bank in 2020 reported 3.8 per cent NPL ratio and N1.39trillion gross loans and advances to customers to account for N52.96billion NPL by value.

Union bank of Nigeria and Sterling Bank, accounted for N33.46billion and N11.6billion NPL by value as at June 30, 2021.
Union Bank of Nigeria NPL ratio rose to 4.4 per cent as at June 30, 2021 from four per cent in 2020 FY while Sterling Bank reported NPL ratio that closed June 30, 2021 at 1.8 per cent from 1.9 per cent in 2020 FY.

Consequently, Union Bank of Nigeria gross loans moved from N736.7billion in 2020 FY to N778.1billion as at June 30, 2021, while Sterling Bank’s gross loans & advances closed June 30, 2021 at N646.88billion from N596.83billion reported in 2020 FY.

Analyst at PAC Holdings, Mr. Wole Adeyeye attributed rise in NPL in these sectors to effect of last year’s Covid-19 pandemic.
According to him: “ The lockdown coupled with dwindling globe oil prices impacted on these sectors performance last year and we are still seeing the effect in the first half of this year. Mind you, the CBN directed banks to restructure loans in these sectors. The lockdown of companies is still trailing these sectors and it tells on bad loans. We are going to see recovery probably by next year in these sectors.”

The Governor, Central Bank of Nigeria (CBN), Godwin Emefiele at the last Monetary Policy Committee (MPC) said the NPL ratio in the banking sector dropped to 5.4 per cent in July 2021, compared with 5.7 per cent in June 2021.
According to him: “The Committee thus, urged the Bank to sustain current efforts to bring NPLs below the 5.0 per cent prudential benchmark. The Committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019. Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”

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