The Nigerian banking sector will experience a sluggish loan growth in 2019, this is according to the Analysts at RMB Nigeria Stockbrokers, who forecasted a six per cent difference in the year-on-year loan growth in 2019 and end of 2020.
The projection made by RMB analysts covers six Nigerian banks – Access Bank, FBN Holdings, Guaranty Trust Bank Plc, Stanbic IBTC, United Bank of Africa and Zenith Bank Plc. These banks had also been listed among the top 1000 banks in the world by The Bankers Magazine.
The six banks covered by the report represents about 25 per cent of the Nigerian bourse, a combined market capitalisation of N2.8 trillion (US$7.8 billion) as at 11 January 2019.
“Within our coverage universe, we identify GTB, Zenith and UBA as our top picks. We also consider Access Bank and FBN Holdings as potential stocks to watch out for in 2019 based on certain milestones.”
Analyses of loan growth
In a ThisDay report, the RMB analysts projected a five per cent year-on-year loan growth in 2019, while they forecasted 11 per cent year-on-year loan growth by the end of 2020. The firm anticipates a surge in the second half of this year, which could mark the beginning of double-digit risk-asset growth for banks.
“We initiate coverage on Nigerian banks with a cautious short-term outlook from a loan book growth perspective. We believe loan growth will be sluggish in 2019 ending, at five per cent year-on-year for our coverage universe.
“We do however, expect a pick-up in lending in the second half of 2019 (post elections) and believe this could mark the beginning of double-digit risk-asset growth for Nigerian banks, following a period of subdued loan growth from macro headwinds. We forecast 11 per cent year-on-year growth in 2020 ending,” they stated.
Sectors with more loan appetite
The loan book of Nigerian banks consists or focuses on two key sectors; Services and oil and gas. Both Services and Oil and Gas are responsible for 37 per cent and 23 per cent respectively; though, analysts says this varies across banks.
Meanwhile, the report stated that the services sector was a major factor in the 2 per cent decline in credit to the private sector from deposit money banks over 2017-August 2018, before declining by 7 per cent year-on-year (2017) and three per cent (year to August 2018).
“In our view, it appears that asset-quality concerns have tapered for Nigeria’s banking system, with the non-performing loan ratio moderating lower to 12.4 per cent in the first half of 2018, from 15 per cent in the first half of 2017,” it added
RMB Nigerian Stockbrokers profile
RMB Nigeria Stockbrokers Ltd (RMBNS) is a member of Rand Merchant Bank — the Corporate and Investment Banking arm of the FirstRand Group, which is the largest financial services group (by market capitalisation) in Africa. In June 2018, RMB announced plans to float a bond programme expected to be listed on the Nigerian Stock Exchange (NSE).