Spiraling loan loss provisions could jeopardize future growth in profit for Nigerian lenders as the bad loans pile in. The increasing number of delinquent debtors mean that banks are left with no choice than write off more loans.
The cumulative loan loss expense of 14 Nigeria lenders quoted on the floor of the exchange in the first nine months through September increased by 80 percent to N170.48 billion, from N94.71 billion last year. This is 60% higher than last year’s figures.
Analysts say loan loss expenses are critical in assessing financial system stability, as they are a key contributor to fluctuations in banks’ profitability and capital positions. This has a bearing on banks’ supply of credit to the economy.
Huge provisions responsible for Stanbic IBTC drop in profit
Stanbic IBTC Holdings 521.33% increase in provisions for bad loans is the highest in the industry. This figure weighs on bottom line as the lender’s net income dipped by 44.45% to N13.56 billion in September 2015; the worst performance since 2013, based on data collated by Nairametrics .
FirstBank’s rising loan loss expense needs curbing
Nairametrics has reported that the balance sheet of First Bank is under the threat of rising bad loans or surging NPLs which is fast approaching the 5 percent threshold set by regulators.
The largest lender by assets 248.98 % increase impairment charge for credit losses to N46.66 billion in the period under review is the highest among its tier one peers. This explains the fall in net income by 9.70% to N50.21 billion.
Tier One Nigerian banks in total saw their loan losses rise by about 142% a worrying sign for investors. Investors recognize these threats and have been fleeing to safety in anticipation of a disappointing 4th quarter.
FBNH (Parent company of First Bank) has seen its share price drop by about 44% this year alone.
