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Analysts of the Nigerian banking sector are expecting the country’s lenders to report an increased profit as their impairment charges for loans reduce. The banks will release their 2017 third-quarter earnings results in coming days.
Analysts are of the view that Banks have not made huge write-offs this year compared to last year when an economic downturn hindered customers from honouring their debt obligations.
“I think that we are coming from a lower base. When the economy was down they made a lot provisions,” said Ayodeji Ebo, managing director and chief executive officer of Afrivest Securities Limited.
“However, in the first and second quarter of the year, they did not book a lot of impairment because the economy has picked up. There will still be impairment but not as much as what we saw last year,” Ebosaid.
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The cumulative loan loss expense of 13 lenders that have released half year results for 2017fell by sixpercent to N201.15 billion in June 2017.This compares to the half year period of June 2016, when impairment charges surged by 45.12 percent to N150 billion.
Analysis of the figures showed that GTBank, recorded an 81 percent drop in impairment charges to N7.21 billion, the largest drop in bad loans provisions.
First Bank Holdings Plc, First City Monument Bank (FCBM), Union Bank, Unity Bank, and Wema Bank, recorded 11 percent, 26 percent, 39 percent, 37 percent and 76 percent reduction in loan loss expense.
However, Zenith Bank’s loan loss expense surged by 196 percent to N42.39 billion.
Banks’ loan impairments moderated due to proactive stance of the lenders in full year 2016 when they created huge collective impairment reserves to act as buffer against future credit losses.
“Most Banks are not actually lending. They have been writing off the ones they had already incurred,” said JohhsonChukwu, managing director and chief executive officer of Cowry Assets Management Limited.
Chukwu said that new exposure such as the one to telecoms giant Etisalat could result in future writes offs. “As far as new ones are not incurred, impairment should be low” said Chukwu.
Nigerian Banks are intensifying efforts risk management, remaining conservative about lending.
The introduction of the Investors’ and Exporter (I and E) by the central bank and the liberalization of the foreign exchange market is a boon for lenders as policy resulted in increased dollar supply.
Also, the rebound in oil production due to the relative peace in the Niger Delta region means oil firms are back to the field to make more money and pay back interest loans taken from the banks.
Nigeria exited recession last quarter as GDP, which had contracted for over 4 previous quarters, rose by 0.55 percent in the second quarter, according to the National Bureau of Statistics (NBS).
The International Monetary Fund (IMF) has projected that the Nigerian economy will expand by 1.9 per cent in 2018, citing improved oil production as reasons for the forecast.
BALA AUGIE
