This Mortgage Bank Just Confirmed Over Half Of Its Loans Are Bad

Mortgage Banks, Omoluabi Savings & Loans released its 2015 full year results reporting a loss after tax of N168 million compared to the N48.1 million profit after tax reported in the same period in 2014.

The Oshogbo based bank is involved in the provision of mortgage banking services to individual, group or corporate bodies to enable them finance the construction, renovation and/or purchase of building at prevailing interest rate for a tenor of 5 years or more as the case may be. They also assist prospective home-owners to have access to mortgage loans at an affordable and regulated annum interest rate and for a maximum tenor of 30 years.

A look at its results reveals the major reason why it reported a loss after tax of N256  million for the period under review. The bank reported a loan loss impairments of about N161.5 million for the period effectively throwing the bank into a losses for the year. It provisioned bad loans of about N39.4 million in 2014.

A further look into the bank’s notes to the accounts reveals that out of its total loans of about N718.2 million it had already made provisions for N353.6  million. The bank further confirms that out of the N718.2 million tot total of N404.5 million broken down into N108 million and N296.5 million was lost and doubtful. Thus over half of its total loans are non-performing. The bank also impaired N72 million out of the N78 million it had as amount invested in quoted and unquoted companies,

Whilst the bank’s total deposits and loans are insignificant in the larger scheme of the banking sector, it highlights a critical concern for analysts looking at the performance of the mortgage market in Nigeria. About 91% of its loans are secured against real estate suggesting that the bank may at worst take possession of the properties used as collateral by the borrowers. The real estate market has been soft since the economic meltdown in 2015 with real estate prices dropping as home buyers cut back on ambitions due to lower disposable income. With the bank’s negative reserves of about N148.4 million it’s only left with the N2.5 billion in share capital to contend with, thus paying dividends will be impossible.

The bank’s location in Osun state is likely also affected by the fiscal challenges facing the state were civil servants are being owed salaries spanning over three months. The state is currently going through a well know revenue crisis thus affecting the ability of borrower to repay their loans.