- Analysts blame weak loan growth, macroeconomic challenges
Five commercial banks have reported N17.725 trillion total assets in the fourth quarter ended December 31, 2019. This was against the N16.030 trillion recorded in the comparative period of 2018.
The banks are Zenith Bank Plc, First Bank of Nigeria Plc, Fidelity Bank Plc, Stanbic IBTC Bank and Sterling Bank Plc.
The Point investigation revealed that under the consolidated and separate statement of financial positions of the banks as at December 2019, Zenith Bank Plc led with a total of N6. 346 trillion in total assets, against the N5. 955 trillion, which was reported in 2018.
First Bank Plc followed with N6. 181 trillion in total assets from N5. 588 trillion, which was recorded the same period of 2018. Others are Fidelity Bank Plc, with N2.116 trillion total assets, against the N1.719 trillion, which was reported in 2018. Stanbic IBTC and Sterling Bank reported N1.876 trillion, against N1.1663 trillion and N1. 203 trillion from N1.102 trillion in the review period of 2018.
Analysts blame macroeconomic variables
Market Pundits, who spoke with our correspondent, had predicted that macroeconomic environment would remain challenging and as such much improvement was not expected in banks’ asset quality, while market operators and other analysts said banks in Nigeria could be motivated to extend credit to the economy, if the macroeconomic condition improves this year.
The Head of Research, Global Capital Investment Limited, Mr. Ademola Adeleke, attributed the marginal increase in banks total assets to weak loan growth and increase in Non-Performing Loans in the sector.
Adeleke said the some of the problems could be attributed to hike in NPL, weak asset bases of the banks that have made it impossible to create loans to customers. “All of these are strengthening their risk management framework, as a result of that their ability to grant credit, especially in the real sector, has been curtailed. Quite a lot of them still have a higher NPL, which is above the CBN’s five per cent threshold.”
He noted that the liquidity ratio of some of the banks had dropped and the capital adequacy ratio had also come down.
Head, Research and Strategy, FSDH Merchant Bank Limited, Mr. Ayodele Akinwunmi, said there were pressure points in the economy that the Federal Government must quickly address in order to stimulate broad-based and inclusive growth.
According to the Lagos-based financial institution, the Nigerian economy has not been expanding enough to lift its citizens out of poverty.
Owing to this, he stressed, there was the need for the economy to expand faster than it was doing “at the moment”
Some of the economic pressure points, FSDH’s Akinwumi further listed, were weak infrastructure development in the economy that might not support the growth ambition of the Federal Government; economic depression in the real estate sector; fragile foreign exchange market, and weak revenue generation, which has led to large fiscal deficits.
“Overall, despite the headwinds and the fact that 2019 presented a tough operating environment for the industry, we remain optimistic on the fundamentals underpinning our long-term retail-led business strategy,” the financial expert told our correspondent.
Commenting on the issue, an investment analyst Mr. Uchenna Ogbonnaya, explained that banking sector credit to the economy would remain passive for as long as yields on government instruments remained attractive, even in the event of a moderation in yields on fixed income instruments.
According to an Investment One report, “Worthy of note however, and given the potential for policy apathy and increased uncertainty in the Nigeria’s economic growth, we should remain cautious on the direction of asset quality in 2019”.
The report also said that the macroeconomic environment would remain challenging, and as such may not see much improvement in asset quality or cost of risk going forward. The report entitled, “2019 Banking Outlook – Slightly Positive but Risks Remain Lopsided to the Downside” had explained.
Meanwhile, a former governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, has said that the total size of Nigerian banks’ assets, which was N43.7 trillion as at half-year 2019, was low compared to the banking sector in some other African countries.
Soludo said this while speaking at the launch of the 2019 Nigerian Banking Sector Report titled: ‘Beyond the Principe…Pulling Back from the Brink,’ by Afrinvest West Africa Limited, in Lagos. He however, stated the need for banks in the country to be able to finance large ticket transactions in the continent.
According to him, “When we started, it was just about N1 trillion, before the banking consolidation. So, if you look at it from where we were before the consolidation, it was a massive change.”But the banks total assets and all we saw about their size are still too small. Let us look at where we are now, in terms of the size, in comparison to African countries, in terms of ranking of banks’ asset size as a percentage of GDP, it is not encouraging.”
“I was shocked to find out that our banks are far low, even by African standard. Countries such as Cape Verde, Mauritius, Kenya, Senegal and Ghana are much higher than us,” Soludo explained.
