It’s like a clash of swords as banks struggle amid a drop in oil price and a weak naira. It is generally accepted that poor management in the Nigeria banking sector results in bad quality assets, and therefore, escalate the level of nonperforming loans. The notion that banks fail as a results of regulatory headwinds alone isn’t so at all times, management ineptitude are also responsible for such setbacks.
Access, Zenith and UBA have strong balance sheet, high returns.
- Of the tier 1 banks, Zenith, Access and UBA have the best asset quality and less exposure to oil and gas and telecommunications. Zenith’s NPL of 1.40 is the lowest among its peer rivals. UBA and Access recorded NPL ratio of 1.8 percent at piece. This means their balance sheets are not in danger.
- These 3 lenders are efficient in reducing costs in generating higher profits Zenith’s Cost to Income Ratio (CIR) reduced to 54.40 percent first six months through June 2015 (H1) as against 56.51 percent last year.
- UBA’s CIR reduced to 64 percent as at H1 2015 from H1 2014. Access bank’s CIR also fell to 56.60 percent in H1 2015 compared to 59.20 percent last year. The lower the CIR the better for a lender.
- The efficient management of resources by these banks have impacted positively on shareholders returns as Return on Average Equity (ROAE) of Zenith increased to 19.40 percent in HI 2015 compared with 18.70 percent last year.
- UBA’s ROAE increased to 22.30 percent in the review period from 18.30 percent the previous year. Access bank’s ROAE jumped to 21.36 percent in H1 2015 as against 18.30 percent last year.
GTBANK’s balance sheet under threat of bad quality assets despite improved efficiency
- GTBank rising NPLs ratio puts the lender’s balance sheet under threat as assets quality wane . This means there are huge unrecoverable debts in the lender’s books and the level of exposure to the oil and gas and Telecommunications is high.
- The Nigeria lender’s NPL increased to 3.73 percent in HI 2015 from 3.15 percent last year. However, GTBank remains the most efficient lender as its Return on Average Equity (ROAE) of 26.63 percent is the highest among peer rivals.
- It CIR reduced to 45.93 percent in the period under review as against 43.75 percent last year.
FBNHOLDINGS spiraling NPL, dipping returns makes it worst performer among peers
- Nairametrics had reported earlier that FBN Holdings is walking on rotten snow as low quality assets are piling and returns to shareholders are dipping despite reduced CIR.
- The largest bank by assets in Africa largest economy recorded a 4.1% NPL in the review period as against 3.0 percent last year.
- The bank may be in a more precarious situation and owners downtrodden when more loans are irrecoverable and lost. The threshold set by the Central Bank for NPLs are 5.0 percent. Any lender that exceeds this threshold will need bailing out or get burst.
- Of all the tier one lenders, only FBNHoldings recorded single digit growth in net income. While Zenith, Access, GTBank, and UBA have deployed shareholder’s resources in generating higher profits, FBN Holdings ROAE reduced to 14.80 percent in H1 2015 as against 15.70 percent last year.