Stakeholders in divergent views over implications
Net interest income hits N797.567bn

THE economic recoveries witnessed in the first half of 2017 did not shield the banking sector from some adversities in the form of rising bad loans. Industry stakeholders have said that the impact is still being felt negatively as banks’ customers were not able to meet their financial obligations on loan repayment, resulting to 14 banks booking N177.3 billion impairment losses for the period.The banks are: United Bank for Africa, UBA Plc, Fidelity Bank, Access Bank Plc, Stanbic IBTC, Ecobank Group, Zenith Bank Plc, GTBank Plc, and Diamond Bank Plc. Others are, Sterling Bank Plc, FCMB Plc, Wema Bank Plc, Union Bank Plc, FBN Holding Plc, and Unity Bank Plc.

However, the growth rate appeared less agitating at 3.6 per cent from N171.243 billion in the corresponding period of 2016, when compared to the net interest income of the 14 banks which stood at N797.567 billion, representing a growth of 28.7 per cent from N619.517 billion recorded in the corresponding period of 2016.

Financial Vanguard review of the banks’ performance with regard to the impairment losses and the interest income showed that the 14 banks recorded credit losses of 22.2 per cent of the net income realised in the period under review. Ecobank Group recorded the highest impairment losses of over N40 billion, while Zenith Bank recorded the highest income in the six months period.

Further analysis showed that First Bank recorded no impairment loss with low interest income, while Fidelity Bank recorded the least impairment loss of N4.81 billion.

Meanwhile, top five banks on impairment losses for the period under review showed that Ecobank recorded N49.016billion representing a growth of 54.3 per cent from N31.764 billion in the corresponding period of 2016; it was followed by Zenith Bank with N34.512 billion, showing a growth of 196 per cent. Diamond Bank recorded N20.312 billion, representing a growth of 6.9 per cent from N18.998 billion, followed by Stanbic IBTC, which recorded N13.953 billion, representing a growth of 65.1 per cent and Unity Bank recorded N11.227 billion, showing a drop of 37 per cent from N17.833 billion in 2016.

The top five banks on net interest income for the six months period ended June 30, 2017 showed that Zenith Bank recorded N144.165 billion, representing a growth of 48.3 per cent from N97.231 billion recorded in the corresponding period of 20116; it was followed by Ecobank recording N142.739 billion, showing an increase 18.8 per cent from N120.109 billion in 2016, UBA recorded N101.379 billion, representing a growth of 58.1 per cent from N64.132 billion.

Access Bank followed on the chart with N83.042 billion, showing a growth of 21.3 per cent from N68.451billion and GTBANK recorded N63.408 billion, indicating a growth of 65.5 per cent from N38.321billion.

Stakeholders’ reactions

In his reaction to the rise in loan losses, Managing Director, High Cap Securities Limited, Mr. David Adonri, said: “Non Performing Loans, NPL are mounting because borrowers are yet to recover from the economic crisis. Interest income for most banks is mainly from public sector lending which is at high interest rate. For 14 banks to suffer such impairment, it means that there is danger looming.”

The spokesperson for Independent Shareholders Association of Nigeria, Mr. Moses Igbrude said: “The implication of increase in loan losses provision is that these banks’ customers default in loan repayment is on the increase, which invariably will lead to low or no returns to the shareholders at the end of the financial year. It is a sign that the loan facilities given are not performing and it has a grave consequence on the banking industry, which means danger looming in the sector.

“Managements should device ways of monitoring all processes of giving out loans. Government should try to improve the economy by diversify the economy away from oil. They should provide a favourable forex market. Government policies should be consistent with what they preach. They should focus on local production, especially agriculture so that Nigeria can feed itself as a nation. Government should encourage export by paying for the EEG (Export Expansion Grant) as they promised the exporters. They should pay local contractors. Also federal and state governments should pay their workers regularly. This will jump-start the economy and raise the purchasing power of the people. Then the NPL will reduce and banks impairment losses will reduce.

In his comment, former National Publicity Secretary of Nigeria Shareholders Solidarity Association, NSSA, Alhaji Gbadebo Olatokunbo, said: “The reasons for these NPL is well known. Some of the NPL comes from loans to telecommunication/oil companies and others, while most of the companies if not all were performing.

“But we also know that the regulatory agencies would force them to make provisions. So both the banks and their debtors are going-concerns; Therefore, there is no cause for alarm as the capital would be recovered either now or later.

“The implication of these is that investors should brace up for the results of a bad economy, although, investors invest in the market for a long term, and don’t forget that the banks are making cool profits in other areas of their operations and some if not many banks will still deliver but not as much as expected. This means that we may have good dividends, but not bumper-harvest-dividends

“We should note that Nigeria just got out of recession and inflation is a by-product of bad economy. It will take some time to fix and improve bad economy and as it improves, then inflation would be tamed. One very bad attitude of we Nigerians is that we so much believed in miracles, which doesn’t work with the economy. Economic policies must be well formulated and executed to impact on banks performance.

“We’ve been down economically and so government must follow the due process, with serious improvement in the implementation of good policies in order to achieve a good result and it will take some time to get the economy back on track and never through miracles; while the citizen must be seen to be supporting the economic recovery agenda.”

Impairment losses

Mr. Oderinde Taiwo, National Coordinator, Proactive Shareholder Association of Nigeria, PROSAN, said: “It is really not good for the banking sector as impairment losses is on the increase. It is an indication that banks’ customers are not honouring their promises which could be linked to liquidity problem. Government need to inject money into the economy to improve business activities.

“The implication to stakeholders in these banks is that it will affect the bottom line at the end of the financial year and invariably affect return on investment. Shareholders should not expect higher divided except if some of these NPLs are recovered.”