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GTB, FirstBank, 7 Other Banks’ Loan Books Drop To N10.3trn



Commercial banks in the country have continued to remain averse to lending as the loan books of most of the banks that have released their financial results showed a declining trend bringing the total credit to customers by nine banks to N10.337 trillion in the first half of 2018.

This is 7.2 per cent shy of the N11.138 trillion total loan book of the nine banks at the end of the 2017 financial year. Unaudited results for the H1 2018 released by Guaranty Trust Bank, Zenith Bank, Union Bank, FBN Holdings, Ecobank Transnational, Diamond Bank, First City Monument Bank, Wema Bank and Sterling Bank showed that only two banks had recorded growth in their loan books.

Sterling Bank and Wema Bank had been able to grow their loan books during the six months period. While Wema’s lending to customers had grown by 8.6 per cent that of Sterling was up by five per cent. From N205.713 billion as at the end of the 2017 financial year, Wema’s loan book had grown to N223.43 billion. Sterling Bank’s loan book had likewise grown to N628.002 billion as against N598.073 billion figure of full year 2017 and N609.785 billion of the first quarter of 2018.

Despite the declining lending, some of the banks are optimistic of a growth in their loan books by the end of the 2018 financial year. Zenith Bank, last week said it expects to increase its loan book by 2.5 per cent by the end of the year.

This is expected to offset a 10.9 per cent decline in its loan book in the first half of the year. Zenith Bank’s loan book had declined from N2.1 trillion as at December 2017 to N1.873 trillion by the end of June 2018. Zenith Bank on a call with analysts said weak economic growth affected lending last year.

However, as the economy improves the bank said it expects loans to grow, especially as the central bank introduces liquidity to the banking sector targeting credit to manufacturers. “For the manufacturing sector, we still see some opportunity there. We believe that there would be an incentive for the manufacturers and the engagement has started.”

The loan book of Guaranty Trust Bank had also been down by 10.8 per cent during the six month period, dropping from N1.448 trillion to N1.291 trillion while that of FCMB had dropped by 9.9 per cent to N584.98 billion form N649.79 billion.

FBN Holdings had seen its loan book drop to N1.858 trillion, a 7.2 per cent drop compared ot N2.001 trillion for 2017 while for Ecobank Transnational, the volume of its lending to customers had dropped by 6.4 per cent from N2.863 trillion to N2.681 trillion. With  3.7 per cent decline in its loan book, Diamond Bank which saw a substantive drop in its profit in the first half of the year hopes to improve its lending to customers by the end of this year. The bank’s lending had dropped to N727.69 billion by the end of June from N755.5 billion as at December 31, 2017.

Managing director of Diamond Bank, Uzoma Dozie told analysts that the bank expects its loan growth to return, growing five percent this year.  “The loan growth would come from corporate banking. With the turnaround in GDP we would begin to see opportunities in fast moving consumers’ good, manufacturing,” he said.

Worried by the declining level of banks not lending to the private sector, the members of the Monetary Policy Committee of the Central Bank of Nigeria had at its last meeting in July introduced a differentiated cash reserve requirement (CRR) regime aimed at directing cheap long term bank credit at nine per cent, with a minimum tenor of seven years and two years moratorium to employment elastic sectors of the economy, particularly agriculture and manufacturing.

However, analysts are of the opinion that the action is not enough to encourage banks to increase lending to the private sector. In spite of the improvements in business activities as well as the recovery recorded by the Nigerian economy, banks have continued to be wary of lending to the public as the loan book of most banks declined in the first three months of 2018.

According to economist, investment research analyst at Cordros Capital Limited, Peter Moses, as long as the underlying factors which impedes growth of business activities in the country are not addressed, banks would continue to be wary of increasing lending.

“Deposit Money Banks (DMBs) are largely aware that the high cost of doing business in Nigeria, elicited by infrastructural decay, multiple taxation, land ownership structure, enforcing contracts, inter alia, more than anything else, significantly increases the risk of loan default.

“We believe DMB’s risk averseness to credit creation will continue to play out, at least in the short term, considering still-attractive returns on government securities” he stated adding that “it is rather difficult to accurately assess the potential impact of that without further details and framework cum modus operandi.”