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The slowdown in the economy, which has led to a high rate of non-performing loans in the banking system, made four banks to lose at least N17bn in profits in the first quarter of this year, results of the financial institutions posted on the website of the Nigerian Stock Exchange have shown.
Specifically, Ecobank Transnational Incorporated, Guaranty Trust Bank Plc, Unity Bank Plc and Diamond Bank Plc recorded a combined decline of N17bn in their profits before tax for the three months ended March 31, 2016, when compared with the corresponding period of 2015.
According to the 2016 first quarter unaudited financial results filed with the NSE, Ecobank, GTB, Unity Bank and Diamond Bank recorded profit before tax of N20.63bn, N30.68bn, N1.05bn and N6.04bn, respectively.
When compared with the PBT of N30.52bn, N32.65bn, N4.26bn and N7.94bn recorded by the banks in the first quarter of 2015, the combined PBT of the four banks dropped by N17bn from N75.4bn in the first quarter of last year to 58.4bn in the same period in 2016.
While Ecobank’s PBT fell from N30.52bn in the first quarter of 2015 to N20.63bn in a similar period of this year, GTBank’s dropped from N32.65bn to N30.68bn. That of Unity Bank dropped from N4.26bn to N1.05bn, while Diamond Bank’s came down from N7.94bn to N6.04bn.
In terms of their profit after tax, the four banks recorded a decline of N14bn.
Nigerian banks had been posting sharp increases in profits before tax and profits after tax since 2011 after the establishment of the Asset Management of Corporation of Nigeria in 2010 following the banking sector crisis in 2009.
However, consistent drop in the global prices of crude oil, Nigeria’s main foreign exchange earner, since June 2014, caused banks’ profit to start declining at the end of 2015.
Majority of the 15 banks listed on the NSE recorded decline in their full-year profits in the 2015 financial year. However, a few ones such as Access Bank Plc, Zenith Bank Plc, United Bank for Africa Plc and GTBank outperformed the market despite sizeable volume of bad loans.
In the first quarter of 2016, 13 out of the 15 banks whose shares are quoted on the NSE posted a combined PBT of N135.36bn, compared to N148bn in the corresponding period of last year.
Similarly, the 13 banks posted profits after tax of N116.6bn in the first quarter of 2016, compared to N126.4bn in the first quarter of 2015.
The 13 banks are Access Bank Plc, Diamond Bank Plc, Ecobank Transnational Incorporated, First Bank of Nigeria Limited, GTBank, FCMB Limited, Sterling Bank Plc, Fidelity Bank Plc, UBA Plc, Unity Bank, Wema Bank Plc, Union Bank Plc and Zenith Bank Plc.
Skye Bank Plc and Stanbic IBTC Bank have yet to release their full-year 2015 and first quarter 2016 financial results.
An economic analyst and Head, Investment Advisory, Afrinvest West Africa Limited, Mr. Ayodeji Ebo, said the declining profit in the financial services sector was a reflection of the challenges facing the Nigerian economy.
He said, “Most of the loans in the banks’ books have not been performing on the back of the sharp decline in oil prices. The recent GDP growth rate figure released showed that growth contrasted even in the manufacturing sector, real estate, and oil and gas sectors, among others.
“Delay in fiscal policy choice of monetary and foreign exchange policy have all combined to impact the banks’ risk assets.”
Bad loans, naira volatility and other economic headwinds had made Ecobank, Union Bank, First City Monument Bank Limited, Wema Bank and Fidelity Bank to post a combined profit decline of N53.54bn in the 2015 financial year.
The Chief Executive Officer, HighCap Securities, Mr. David Adonri, said the decline in profits was traceable to ineffective risk management practice in some of the banks and low activities in 2015 due to the political transition, among other variables.
The bad loans in the banking industry rose sharply by 78.8 per cent to N649.63bn in 2015, indicating severe deterioration in the quality of the loan portfolio of the 22 banks, a CBN staff report presented to the Monetary Policy Committee revealed.
The report indicated a general increase in the bad/non-performing loans among the 22 deposit money banks in the country. This was despite the 30 per cent decline in new loans granted by the banks in 2015 to N5.78tn.
According to the report, 18 out the 22 banks recorded increase in bad loans. Furthermore, the number of banks that exceeded the regulatory limit of five per cent for the ratio of bad loans to total loans rose from three in 2014 to eight last year, with three exceeding 10 per cent.