United Bank for Africa (UBA) came out today with smoking results that beat analysts’ expectations.
While shareholders may be heaving a sigh of relief with Full Year earnings showing resilience, low NPLs and higher profits, a look closely behind the numbers (and drivers of profitability) shows a bank that is not playing its key intermediation role for the economy.
At the Group level UBA reported loans and advances to customers fell 3.73 percent to N1.03 trillion in FY 2015, compared to N1.07 trillion in December 2014.
Meanwhile the lenders assets of investment securities increased by 30.3 percent to N856.8 billion in 2015, from N657.5 billion in 2014.
What this means is that credit that drive the wheels of an economy are not being extended to customers while the bank binges up on high interest bearing government securities.
When the Nigerian only operations are further looked at the situation is even worse.
UBA loans and advances to customers in Nigeria fell by 5.5 percent to N835 billion in 2015, from N884.5 billion in 2014.
Exposure to investment securities increased 31 percent to N504.4 billion from N384.2 billion.
The Bottom-line is :
If Nigerian Banks are not really growing their loan book but reporting huge profits then it is a problem for the economy at large.