Guaranty Trust Bank (GTBank), Access Bank, United Bank for Africa (UBA), and Sterling Bank have seen rapid acceleration in bad loans compared to peers as a slow economic recovery exposes the industry to deteriorating asset quality.
Guaranty Trust Bank’s impairment charge on financial assets surged by 209.65 percent to N6.76 billion as at June 2020, UBA’s spiked by 150.22 percent to N7.80 billion, and Sterling Bank surged by 165.83 percent to N6.57 billion.
Access Bank, the largest lender by total asset, felt the pang of the current shocks more than peers as band loans surged by 237.34 percent to N14.65 billion.
Pre-Covid-19 era, Nigerian largest banks had been struggling with punitive regulations and the central bank decision to bar non-financial institutions from its Open Market Operations (OMO) sent the Treasury bills crashing.
Many customers have defaulted on loans due to business paralyzes caused by lockdown imposed by the government to curb the spread of a virus that has put the country on verge of a recession.
That means revenue and profit will be pressured, and a bleak economic outlook on the back of a second wave of second coronavirus infections and the country’s deteriorating fiscal conditions means bad loans will balloon.
The 2021 outlook for sub-Saharan Africa’s largest economy was cut to growth of 1.7 percent by the International Monetary Fund.
Nigeria’s gross domestic product will probably shrink 4.3 percent for this year, the IMF said, as a lockdown to contain the Covid-19 outbreak, lower oil prices and rampant dollar shortages weigh on output.
Analysts are of the view that the small and midsized banks are more exposed or vulnerable to macroeconomic headwinds because they have weak capital buffers.
Cairo based EFG expects non-performing loans (NPLs) will rise to 7.6 percent of total credit at the end of the year, as the economy deteriorates, increasing impairment charges.
In the last four years (2017-2020), the largest Nigerian banks incurred a collective N446.48 billion in NPLs as at June 2020, according to data gathered by MoneyCentral.