Nigerian Banks will continue to put a brake on lending to the real sector of the economy as yields on government securities remain attractive to them.
While the recent credit condition survey report by the Central Bank of Nigeria (CBN) for the first quarter of 2019 showed increased lending supported by improving economic outlook, analysts are of the view that banks loan growth will remain muted.
Analysis by Markets Intelligence validates the above position of experts because loans have been ebbing since 2016 and there has not been an improvement in 2018 as interest income continues to nose dive, and hence, undermining profitability.
For instance, the 2018 audited financial statement of 12 largest lenders quoted on the floor of the bourse showed cumulative loans and advances fell by 7.96 percent to N12.13 trillion from N13.18 trillion.
A breakdown of the figures showed combined gross loans increased by 25.89 percent to N10.50 trillion between 2013 and 2014 financial year, while it was up by a meagre 2 percent to N10.71 trillion between 2014 and 2015, period when the devaluation of the currency ballooned dollar denominated asset, but the loans fell by 21.97 percent between 2015 and 2016.
“Even in the event of a moderation in yields on fixed income instruments, many banks believe that as long as yields remain above 10 percent, they still remain attractive considering that fixed income instruments have no Capital Adequacy Ratio (CAR) implications, are tax free and do not result in NPLs,” said analysts at CSL Stock Broker Ltd.
Analysts at CSL Stock Brokers expect that the weak economic recovery will constrain strong demand for loans as they forecast an average loan growth of 10 percent for the tier one banks while average loan growth of 15 percent for the tier 2 banks within their converge.
Drilling down the figures shows GTBank’s total loans and advances fell by 9.69 percent to N1.45 trillion in the period under review from N1.59 trillion the previous year.
Zenith Bank’s total loans and advances were down 8.57 percent to N2.10 trillion in December 2018 from N2.28 trillion the previous year.
First Bank Holdings Plc’s total loans and advances were down 7.43 percent to N2.74 trillion in the period under review from N2.54 trillion the previous year.
Bala Augie
