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Financial Services

Nigerian banks Non-Performing Loans ratio jump to 6.3%

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The Non-Performing Loans (NPL) ratio of commercial banks in Nigeria jumped to 6.3% for the month of February 2020, according to data from the Central Bank of Nigeria.

The NPL ratio measures the rate of bank loans that are either going bad because they are not being serviced adequately or have gone bad completely.

What the CBN is saying

“The MPC noted the performance of the Financial Soundness Indicators (FSIs) of the DMBs which showed a Capital Adequacy Ratio (CAR) of 15.2 percent, Non-Performing Loans (NPL) ratio of 6.3 percent and Liquidity Ratio (LR) of 40.5 percent, as at February 2020. On non-performing loans (NPLs), the MPC noted that the ratio remained above the prudential benchmark of 5.0 percent and urged the Bank to sustain its regulatory measures to bring it below the prudential benchmark.”

READ: How the CBN sourced the $25 billion (N10 trillion) it lent the FG

The central bank regulatory acceptable NPL ratio is 5%, however, this ratio has been breached since the fall in oil prices began in the 4th quarter of 2019 and the Covid-19 pandemic broke in 2020.

In the CBN’s 2020 4th quarter economic report, the NPL ratio for the month of December stood at 6.1% up from 6.06% in December 2019. Despite the rise in NPL, the apex bank still believes Nigerian banks are healthy.

“The health of banks was generally sound, although the quality of their assets, measured by the ratio of Non-Performing Loans (NPLs) to industry total outstanding loans, stood at 6.1 percent at end-December 2020, compared with 6.06 percent at end-December 2019 and above the 5.0 percent prudential requirement.”

READ: Report identifies banks expected to raise equity after COVID-19 flattens

Why this matters

The NPL ratio is one of the most important benchmarks for measuring the health of the banking sector. At above 6%, it indicates most commercial banks are carrying more underperforming loans than expected mostly because the private sector is not servicing the loans.

SSKOHN
  • Nairametrics believes some of the loans may be worse than reported going by past reports where what is reported by some banks appear understated when compared to what is real. Most of the major oil majors are reportedly falling behind on servicing loans due to the Covid-19 pandemic and fall in oil prices.
  • The CBN has also given banks a lifeline, allowing them to defer loan repayments that have fallen due by either restructuring the loans or refinancing them. This helps banks avoid the need to make provisions for the loans which would have inadvertently increased their NPL ratio.

Meanwhile, the Capital Adequacy Ratio which measures the balance sheet strength of banks improved from 15.1% in December 2020 to 15.2% in February 2021. It is still lower than the 15.4% reported in September 2020.

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Dividends

Linkage Assurance Plc proposes N500 million as final dividend for 2020, bonus issue on existing shares

In addition to the payment of the cash dividend of 5 kobo per share, shareholders will also be issued a bonus of 2 new shares for every 5 existing shares held in the company.

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The Board of Linkage Assurance Plc has proposed a final dividend of N500 million and a bonus issue to existing shareholders of the company for the period ended 31st December 2020.

The company’s Board made this announcement in a notification published on the website of the Nigerian Exchange Group Plc (NGX), stating that a dividend of 5 kobo per share will be paid on all the issued 9,999,999,994 ordinary shares of the company.

In addition to the payment of the cash dividend of 5 kobo per share, shareholders will also be issued a bonus of 2 (two) new shares for every 5 (five) existing shares held in the company, amounting to N2 billion.

READ: Linkage Assurance set to raise capital to N15 billion  

Qualifying conditions

The following conditions must be met by shareholders, to benefit from the recent bonus issue and dividend:

  • Only shareholders, whose names appear in the Register of Members at the close of business on the 30th of April, 2021 will be considered.
  • Shareholders must have completed the e-dividend registration and must have mandated the Registrar (Centurion Registrars) to pay their dividends directly into their bank accounts.
  • For the purpose of the dividend payment, the Register of Shareholders will be closed from 3rd to 10th of May, 2021.

Sequel to the aforementioned points, the dividend will be electronically paid to qualified shareholders on the 26th of May, 2021.

READ: UBA proposes N11.97 billion as final dividend for shareholders in 2020

What you should know

  • Linkage Assurance Plc had earlier declared a profit after tax of N2.4 billion in FY 2020, and consequently proposed a final dividend of 5 kobo per share.
  • It is pertinent to note that the firm did not declare any cash dividend last year. However, it announced a bonus issue of 1 (one) share for every 4 (four) shares held by existing shareholders, amounting to N1 billion in the same period.
  • Therefore, the recent bonus issue is 50% higher than what was declared in the preceding year.
  • Linkage Assurance shares is currently trading at 80 kobo at the time of writing this report.

To read related contents and for more insights, visit: https://stocks.nairametrics.com/

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Corporate deals

Access Bank moves to acquire BancABC Botswana

The Nigerian bank would buy just over 78% of BancABC Botswana for an undisclosed cash amount of about 1.13 times the book value plus a two-year deferred payment.

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According to a memo published today, Access Bank, Nigeria’s largest lender, has agreed to buy a majority stake in African Banking Corporation of Botswana for cash, only a month after buying a South African bank.

Stagflation and dollar shortages in Nigeria have frustrated industries and shrunk the lending sector, prompting Access Bank to extend across the African continent. Atlas Mara said in a statement on Monday that the Nigerian bank would buy just over 78% of BancABC Botswana for an undisclosed cash amount of about 1.13 times the book value plus a two-year deferred payment.

Access Bank now has a presence in ten African countries thanks to the agreement with ABC Holdings, a local subsidiary of Atlas Mara, a London-listed company. It should be completed by the end of the second quarter.

Herbert Wigwe, the Chief Executive Officer of Access Group, told the public that the company is focused on growth. “We remain committed to a focused and deliberate expansion strategy in Africa, which we believe will generate solid, long-term returns,” the bank said.

According to Access Bank, BancABC is Botswana’s fifth-largest bank, with a strong retail loan portfolio and plans to expand into corporate and small-to-medium-sized business lending. Nigerian lenders have been looking for new ways to increase profits in the face of slowing domestic inflation, falling government bond yields, and an increase in restructured loans as a result of the COVID-19 pandemic.

In March, Access Bank paid $60 million for a majority stake in South Africa’s Grobank, making it the first Nigerian bank to enter the country. It has also recently signed agreements in Zambia and Mozambique. Access Bank is restructuring into a holding firm to drive its international growth with more than $16 billion in reserves and an emphasis on corporate and retail banking.

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