NPF Microfinance Bank recently released its audited results for the 2018 financial year and first quarter ended March 2019.
2018 results showed a sharp decline in the bank’s bottom-line. While gross earnings increased from N3.6 billion in 2017 to N3.9 billion in 2018, profit before tax fell sharply from N819 million in 2017 to N287 million in 2018. Profit after tax also dropped from N631 million in 2017 to N195 million in 2018.
The causes
The poor performance may have been due to provisions following the fraud committed by one of the bank’s staff, and the adoption of IFRS 9.
- Total operating expenses jumped from N2.5 billion in 2017 to N3.2 billion in 2018
- Net impairments and administrative expenses had the sharpest increases.
- Net Impairments also jumped sharply from N184 million in 2017 to N446 million in 2018.
- Administrative and general expenses increased from N901 million in 2017 to N1.2 billion in 2018.
Why net impairments rose
- Net impairments may have risen due to the adoption of IFRS 9.
- The key change arising from the adoption of IFRS 9 was that the bank’s impairment losses on financial assets are now based on an Expected Credit Loss (ECL) mode.
- This means that impairments are made on expected future losses due to macroeconomic variables.
- Prior rules were based on an incurred loss model where only past and present loss events were considered.
The fraud incident
The sharp rise in administrative and general expense was due to a fraud case involving one of the bank’s staff.
- There was a case of fraud involving a middle management employee at the Sokoto branch of the bank.
- The bank lost the sum of N266,480,000 from the fraud.
- A sum of N35,500,000 has been recovered to date, while the remaining balance has been fully written off during the year.
- Appropriate action has been taken against the complicit employee for further recovery.
Going Forward
In a bid to prevent a reoccurrence, the bank has taken several corrective measures:
- Strengthened the key controls and procedures surrounding its operations.
- Appointed Assistant Regional Heads and redeployed staff.
The consequences
Shareholders of the bank, bear the brunt of the bank’s poor risk management, as it has had to cut down its dividend per share sharply. Dividend per share fell by 70.5% from 17 kobo in 2017 to 5 kobo in 2018.
About NPF Microfinance bank
NPF Microfinance Bank was incorporated in Nigeria as a Private Limited Liability Company on 19 May, 1993. It obtained a provisional license as a Community Bank from the Central Bank of Nigeria on 12 July 1993 with License No. FC 00200 and commenced operations on 20 August, 1993.
The bank obtained a final license from the Central Bank of Nigeria on 24 January, 2002. It was registered as a Public Limited Company on 13 July, 2006. The bank was given an approval-in-principle to operate as a Microfinance Bank on I0 May, 2007 and obtained the final license on 4 December, 2007. The shares of the bank were listed on the Nigerian Stock Exchange on 1 December, 2010.
