Q2 2017: Bad Loans in 10 Lenders Rise by N19bn —Analysis

• Q2 2017: Bad Loans in 10 Lenders Rise by N19bn

From N216 billion recorded by 10 lenders in the first half of 2016 to N235 billion in the same period of 2017, the total impairment charges recorded in the first six months of this year have increased by N19 billion.

Analysis by Nigerian expert which showed the above results for 10 lenders, covered the following banks: First Bank of Nigeria (FBN) Holdings, First City Monument Bank (FCMB), Union Bank, Sterling Bank, Diamond Bank, Zenith Bank, GTBank, Access Bank, UBA and Ecobank Transnational Incorporated.

Impairment charges are provisions for loans which borrowers have defaulted and may no longer be recovered, especially for banks that had more exposures to upstream oil sub-sector, power sector and foreign currency loans.

Despite its growth in profit, Zenith Bank ranked top with 198.5 per cent increase in its H1:2017 impairment charges/write back from N14.2 billion in 2016 to N42.4 billion in the current period. It is followed closely by Ecobank with 92.7 per cent increase in impairment charges/write back.

However, FBN Holdings with N62.4 billion impairment charges booked 10.7 per cent reduction when compared with N69.4 billion recorded in half year 2016; FCMB’s N10 billion is a 26.1 per cent reduction in credit impairment charges from N13.5 billion in the corresponding period of 2016. Union Bank recorded 36.8 per cent decrease, but booked N5.4 billion credit impairment charges in 2017 compared with N8.8 billion recorded last year. In the same way, Sterling Bank booked N4.1 billion impairment charges in the first 6 months of 2017 compared with N3.7 billion recorded last year, while Diamond Bank’s impairment charges increased by 6.9 per cent to N20.3 billion from N19 billion recorded last year.

Similarly, Guaranty Trust Bank recorded impressive 80.8 per cent decrease in impairment charges to N7.2 billion, from N37.5 billion in the corresponding period of 2016. Access Bank at N10.4 billion managed 1.5 per cent increase from N10.2 billion while the United Bank for Africa booked 38.4 per cent increase to N9.4 billion from N6.8 billion recorded in H1 2016.

Impairment is specifically used to describe a reduction in the recoverable amount of a fixed asset below its book value. Its negative effect on profit is always high.