Nigerian Banks’ loan growth has slowed in the second quarter as macroeconomic uncertainties weaken lending to key sectors of the economy.
The cumulative total loans and advances to customers of the 12 lenders that have released Half Year 2017 results dipped by 1.0 percent to N13.37 trillion in June 2017.
This compares to the half-year period to June 2016 when loans and advances to customers by the banks spiked by 18.87 percent or N2.01trillion to N12.71 trillion.
“It is not surprising that loan book continues to shrink. Coming into the year, we had expected that credit growth to be contained in 2017 as the banks take a cautious stance on credit expansion has given the heightened risk environment,” said Olalekan Olabode, Head, Research Division Vetiva Capital Management Limited.
“Whilst credit demand remains modestly healthy, supply by the Nigerian banks has been weak and we expect this trend to persist in the near term,” said Olalekan.
Drilling down into the numbers Guaranty Trust Bank Plc, the largest lender by market value, had totals and advances to customers dip by 5 percent to N1.48 trillion in Q2, 2017, while Access Bank’s and First Bank’s total loans fell by 4 percent and 5 percent to N1.74 trillion and N1.98 trillion respectively in Q2, 2017, compared to the earlier 2016 period.
However, Fidelity Bank’s total loans on the balance sheet increased by slightly 0.03 percent as the lender remained cautious of increasing its exposure to selected sectors of the economy.
“In absolute terms, growth was driven principally by the Downstream Oil & Gas Sector, Agriculture, General Commerce and Construction Sector etc,” said Fidelity, in its half-year investor presentation.
“Energy, Transport, Power, and Manufacturing account for over 80 percent of our Foreign Currency Loan (FCY) loan book” the lender added.
On the tier 2 front, First City Monument Bank (FCBM)’s total loans dipped 2 percent, and Diamond Bank; (-1 percent). Union Banks’ dipped 3 percent to N477.46 billion.
However, Stanbic IBTC Holdings’ total increased slightly by 2 Percent to N376.63 billion. Nigeria Banks are making frantic efforts to derisk the balance sheet and grow investment grade.
Access Bank said foreign currency denominated loans declined to $1.76 billion in June 2017, down 12 percent from $2.19 billion as at December 16, reflecting the Bank’s delicate strategy to derisk the loan portfolio.
Foreign currency portfolio in First Bank (Nigeria) constitutes 52.1 percent of total loans and advance to the customer in the period under review as against 51.10 percent as at December 2016.
“Oil & Gas portfolio now constitute 38.6 percent of gross loans and advances with upstream, downstream and service accounting for 21.8%,8.2% and 8.6% respectively H12017 (FY2016: 21.3 percent, 14.1 percent, and 6.8 percent). 74 percent of total Oil and Gas loans are in FCY,” said First Bank.
