Tier-II Banks Go Big on Loans as Top Lenders Slow Down

• Tier-II Banks Go Big on Loans as Top Lenders Slow Down

Nigeria’s small banks, referred to as Tier-II banks are growing their loan books ahead of top lenders.

Data shows top lenders, referred to as Tier-I banks, are cutting back on loans and advances to customers during the first half of the year.

Cumulatively, loan books of Guaranty Trust Bank, Zenith Bank, Access Bank, United Bank for Africa and First Bank contracted by 6.6 percent as at June 2018, when compared to 2017. The two most capitalised banks, GTB and Zenith contracted the most, dropping 11 percent apiece.

However, while top lenders have taken a conservative approach to lending this year, smaller banks have expanded their loan books.

Data shows Sterling Bank and Fidelity Bank grew their loans by 20 percent and 10 percent, respectively, while Wema Bank and Stanbic IBTC expand their loans by 9 percent each.

Smaller banks focus on Micro, Small and Medium Enterprises (MSMEs) during the period, according to spokespersons from Sterling and Fidelity banks.

“We are big on small businesses and have created several loan products for that segment,” one of the spokesmen said.

Sterling Bank increased loans by the most to the consumer sector, following a 48 percent surge from N5.7 billion filed in December 2017 to N8.5 billion in June 2018. While Fidelity Bank did more in the manufacturing sector during the period under review.

The Stanbic IBTC loans to the petroleum sector surged the most in the six months covered.

“The small banks are taking an aggressive approach to lending because they need to grow their balance sheet, while the big banks are holding back and de-risking their balance sheet,” in an economy that is faced with political uncertainty ahead of the 2019 presidential elections, said Johnson Chukwu, CEO of asset management company, Cowry Assets.

“If the small banks can manage the quality of the risks they are taking and it translates to higher interest income, it provides a window for them to catch up with the Tier-I banks,” Chukwu added.