As the nation and private businesses operating in the economy continue to source for way out of the current economic recession, Diamond Bank Plc, Ecobank Plc, First Bank of Nigeria Holdings Plc have recorded over N1.02 trillion Non-performing Loans 9NPLs) in nine months of 2016.
This represents an increase of 221 percent from N316.9 billion recorded in prior nine months of 2015.
The weak macroeconomic indices in 2016 (rising inflation, foreign exchange scarcity, Gross Domestic Product contraction) continue to affect these financial institutions business activities and negatively impact performance, reflecting the tough operating environment.
For the nine months ended September 2016, FBN Holdings announced that its Non-performing Loans significantly increased by 550 percent to N616.7 billion compared to N94.9 billion recorded in the corresponding nine months of 2015.
The increased Non-performing Loans of FBN Holdings skyrocketed its NPLs/gross loans to 25 percent in nine months of 2016, above the five percent threshold of Central Bank of Nigeria.
On the $400 million Atlantic Energy loan, the management of FBN Holdings had said that the recovery progress was significantly slower than anticipated.
“The current challenges in the upstream oil and gas sector coupled with the cloudy outlook for crude oil prices may stall the remediation of this loan and management may have to increase the credit provisions for the loan by end of 2016 financial year,” researchers at CardinalStone have explained
The Lagos based company said however, that there was good news on the Aiteo’s credit facility as the company ramped up production from 20,000 bpd to 90,000 bpd. According to management, the restructuring of this loan should be finalized in a few weeks.
“In all, we expect coverage ratio to improve marginally upon the completion of the restructuring of Aiteo’s credit facility but we remain wary of the Atlantic energy loan and the impact on shareholders’ funds if the bank is to make full provisions for this asset.”
For Ecobank, the pan-African bank Non-performing Loans stood at N284.1 billion ($930 million at N305.5/$) in the nine months of 2016, as the financial institution said it was primarily driven by deterioration in economic conditions.
The Bank explained that, “We are working hand in hand with our clients to address problem loans across all of our businesses.
“The non-performing loans coverage ratio was 67percent compared to 73per cent in September 2015.”
In a decisive approach to managing loans book, both financial institutions made huge provisions for bad loans.
Furthermore, Diamond Bank Plc for the period recorded N116.1 billion Non-performing Loans from N38.1 billion in nine months ended September 2015.
Although total comprehensive income declined by 26.3 percent year on year to N13.2 billion, with profit before tax shrinking to N3.5 billion on the back of impairment charges as the bank opted for prudent provisioning by cleansing its books of assets with poor quality, thus paving the way for operational efficiency and improved earnings for the business years ahead.
Chief Executive Officer, Diamond Bank Plc, Uzoma Dozie, had said, We believe the macro conditions and other external factors will remain challenging for the rest of the year and well into 2017.
“However, by pursuing our technology-led retail strategy and with our focus on innovation and scalability, we believe the Bank is well-placed to benefit in the medium to long term from the favourable fundamentals in Nigeria, namely a large population, many of which remain unbanked. This strategy stands to benefit all stakeholders, including our shareholders and customers in the long run.”