Tuesday, April 27, 2021 / 09:20AM / By United Capital Research / Header Image Credit: Suitsme
Earlier, the National Bureau of Statistics released
the Selected Banking Data Report for Q4-2020. In the report, banking sector
Gross loans reportedly grew 16.6% y/y as well as 5.3% q/q to N20.5tn.
Similarly, absolute Non-Performing Loans (NPLs) rose 16.0% y/y and 5.5% q/q to
N1.2tn at the end of Q4-2020. Furthermore, while NPL ratio grew 1bp q/q, it
declined 4bps y/y to print at 6.0% at the end of Q4-2020.
The growth in gross loans from the banking sector
comes despite significant macroeconomic risks in 2020 due to the Covid-19
pandemic. That said, we note that gross loan growth has been driven by a
confluence of factors.
First, the CBN's regulatory directive which saw the
Loan to Deposit ratio (LDR) rise to 65.0% supported lending appetite among
commercial banks. Also, the Naira devaluations over the past year have
increased the Naira value of foreign currency loans.
On the decline in NPL ratio, we believe this was
driven by CBN's regulatory forbearance which allowed banks to restructure their
loan books, particularly in sectors vulnerable to the shocks ignited by the
Looking ahead, we observe that growth risks have continued to dissipate amidst
renewed optimism on full economic reopening in Nigeria. However, the operating
environment for businesses remains fraught with legacy structural concerns.
Thus, we think lenders operating at the CBN's 65.0% Loan to Funding ratio will
be reluctant to provide more credit, while those still falling short will
remain active credit creators, considering the effect of CRR debits on banking
On NPLs, given the banking sector's exposure to the
oil & gas industry, we do not expect a major shock in NPL ratio,
considering the recovery in crude oil prices. Also, the near-fully reopened Nigerian
economy posits a better macroeconomic and business story for loan performance
in non-oil sectors.
- Banking Sector Records 3.46bn Volume of Transaction in Q4 2020 - NBS
- Mobile Money Transactions Increased Globally by 65% in 2020 - GSMA
- Q3 2020
Banking Sector Data: E-Payments on an Upward Trajectory
Sector Records 2.78bn Volume of Transaction in Q3 2020 - NBS
- Banking Sector Records 2.16bn Volume of Transaction in Q2 2020 - NBS
- Banking Sector Records 893.68m Volume of Transaction in Q4 2019 -
- LDR Policy: Over One Year After, Where Are We?
- CBN Retains Minimum LDR At 65%; Encourages DMBs To Maintain Strong
Risk Mgmt Practice
- How Monetary Policy Should Cushion Bank's Non-Performing Loans
(NPLs) -Marcel Okeke