Banks’ Loan Growth Slows On High Risk Environment

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(Sundiata Finance) – Banks’ loan growth has slowed in the quarter as macroeconomic uncertainties weaken lending to key sectors of the economy.

The cumulative loans and advances to customers of the 12 lenders that have released Half Year 2017 results dipped by 1.0 per cent to N13.37 trillion in June 2017.

This compares to the half year period to June 2016 when loans and advances to customers spiked by 18.87 per cent or N2.01trillion to N12.71 trillion.

“It is not surprising that loan book continues to shrink. Coming into the year, we had expected that credit growth to be contained in 2017 as banks take a cautious stance on credit expansion given the heightened risk environment,” said Olalekan Olabode, Head, Research Division Vetiva Capital Management Limited.

“Whilst credit demand remains modestly healthy, supply by the banks has been weak and we expect this trend to persist in the near term” said Olalekan.

Drilling down into the numbers Guaranty Trust Bank Plc, the largest lender by market value, had totals and advances to customers dip by 5 per cent to N1.48 trillion in Q2, 2017, while Access Bank’s and First Bank’s loans fell by 4 per cent and 5 per cent to N1.74 trillion and N1.98 trillion respectively in Q2, 2017, compared to the earlier 2016 period.

However, Fidelity Bank’s loans in the balance sheet increased by slightly 0.03 per cent as the lender remained cautious of increasing its exposure in selected sectors of the economy.

“In absolute terms, growth was driven principally by the Downstream Oil & Gas Sector, Agriculture, General Commerce and Construction Sector etc,”said Fidelity, in its half year investor presentation.

“Energy, Transport, Power and Manufacturing account for over 80 per cent of our Foreign Currency Loan (FCY) loan book” the lender added.

On the tier 2 front, First City Monument Bank (FCBM)’s loans dipped 2 per cent, and Diamond Bank; (-1 per cent). Union Banks’ dipped 3 per cent to N477.46 billion.

However, Stanbic IBTC Holdings’ increased slightly by 2 per cent to N376.63 billion.
Banks are making frantic efforts to de-risk the balance sheet and grow investment grade.

Access Bank said foreign currency denominated loans declined to $1.76 billion in June 2017, down 12 per cent from $2.19 billion as at December 16, reflecting the Bank’s delicate strategy to de-risk the loan portfolio.

Foreign currency portfolio in First Bank (Nigeria) constitutes 52.1 per cent of loans and advance to customer in the period under review as against 51.10 per cent as at December 2016.

“Oil & Gas portfolio now constitute 38.6 per cent of gross loans and advances upstream, downstream and service accounting for 21.8%,8.2% and 8.6% respectively H12017 (FY2016: 21.3 per cent, 14.1 per cent and 6.8 per cent). 74 per cent of Oil& Gas loans are in FCY,” said First Bank. (BusinessDay)