The volume of Non-Performing Loans (NPLs) in the Nigerian banking sector increased by N38.05 billion, some 13.30 percent, to N324.14 billion in 2013 from N286.09 billion as at December 2012, even as the sector continues to enjoy relief from purchase of their NPLs by AMCON.
Total loans in the industry stood at N10.043 trillion in 2013, an increase of 23.22 percent over N8.150 trillion reported in 2012.
The top seven banks, including First Bank, GTBank, UBA, Access, Eco Bank and Diamond accounted for 66.10 percent of total loans in 2013, which is however, against 80.73 percent in 2012.
The Nigeria Deposit Insurance Company (NDIC) said asset quality as reflected by the ratio of NPLs to total loans improved to 3.23% in 2013 from 3.51% in 2012, which compared favourably with the industry maximum threshold of 5%.
Despite improvement in asset quality, the corporation is concerned that the rising NPLs in the banking sector could reverse huge gains made since cleaning up the sector not long ago, and needs to be watched.
“Total assets and total credits recorded significant growth rates of 17.10% and 23.22% respectively, in 2013.
“Assets quality recorded a slight improvement as the ratio of non-performing loans to total loans declined slightly from 3.51% in 2012 to 3.23% in 2013.
“Notwithstanding the fall in NPL ratio, the industry needed to watch the growing volume of NPLs which increased by 12.43% in 2013,” the NDIC noted in its 2013 annual report.
Total Operating Expenses in the industry rose by 29.66 percent to N1.388 trillion in 2013 from N1.070 trillion in 2012, figures from the NDIC report show.
But Return on Assets (ROA), Return on Equity (ROE) as well as Yield on Earning Assets (YEA) declined from 22.20 percent, 2.62 percent and 11.92 percent in 2012 to 19.14%, 2.15% and 12.13% in 2013, respectively.
The ongoing banking and regulatory reforms, however, continued to strengthen the resilience of the banking system, as well as impact positively on the financial condition and performance of the Nigerian banking sector in 2013 as depicted by most of the relevant financial indices.
The banking industry remained very liquid, as the average liquidity ratio stood at 50.63 , which exceeded the prudential minimum threshold of 30 percent as at 31st December, 2013.
Notwithstanding, the average liquidity ratio of 50.63 percent in 2013 shows a decline of 13.28 percentage points over the 63.91 percent recorded in 2012. All the DMBs met the minimum liquidity ratio requirement of 30 percent as at the end of December 2013.
However, the industry continued to maintain the strong capital base as capital adequacy ratio which stood at 17.18 percent in 2013 exceeded the prudential minimum capital adequacy ratios of 10 percent and 15 percent for national and international banks, respectively.
The equity capital grew by 20.72 percent from N188.39 billion in 2012 to N227.42 billion in 2013 while reserves increased by 7.40 percent from N2,216 billion in 2012 to N2,380 billion in 2013.
The enhanced equity capital could be attributed to the three new banks licensed during the year, the NDIC stated.
The adjusted shareholders’ funds (tier I capital) increased by 12.5 percent from N2.15 trillion in December 2012 to N2.42 trillion in December 2013 due to the cumulative effect of the significant improvements in earnings within the period.
Although the capital to risk-weighted assets ratio (CAR) of the banks declined marginally by 0.36 percentage points from 18.07 percent in 2012 to 17.18 percent in 2013, it however exceeded the minimum threshold of 10 percent and 15 percent for national and international banks in Nigeria, respectively.
One bank which the NDIC did not mention, failed to meet the minimum prudential CAR of 10 percent and/or 15 percent out of the 24 banks.
But the banking industry operated profitably during the year, as profit-before-tax stood at N484.784 billion in 2013, a slight improvement over N458.78 billion recorded in 2012.
The NDIC attributed this improvement largely to the growth in interest income and non-interest income, as well as efficient management of interest expense.
The interest income increased by 23.15 percent to N1.950 trillion in 2013 from N1.584 trillion in 2012 while non-interest income grew by 22.99 percent to N623.66 billion in 2013 from N507.08 billion in 2012 .
Onyinye Nwachukwu
