Listed banks reduce NPLs to meet CBN’s 5% threshold

Half year results released by some banks listed on the Nigerian Stock Exchange (NSE) have shown a decline in their non-performing loans (NPLs).

This is in an attempt to meet the five percent threshold for NPLs prescribed by the Central Bank of Nigeria (CBN).

The apex bank’s regulation is contained in the prudential guidelines to microfinance banks, deposit money banks, mortgage refinance companies, finance companies, and development finance companies.

“The NPL limit banks are required to manage their credit risk effectively. To this end, all banks are to ensure that the level of the NPLs in relation to gross loans does not exceed five percent,” the apex bank said.

Ecobank and FBN Holdings, reported a reduction in their NPLs to 14.5 percent, according to their half year ended June 30, 2019 results and accounts submitted to the NSE.

Uk Eke, group managing director of FBN Holdings, had said on the NPL, “Despite the difficult operating environment, we remain resolute in delivering on our guidance across key metrics including our commitment towards a single digit NPL ratio by the end of the year, as evidenced by the reduction in the NPLs from the last quarter.

“Essentially, Atlantic Energy – our largest NPL – was written off, translating into a decline in the NPL ratio from 25.9 percent in December 2018 to 14.5 percent as of June 2019, a step that brings us closer to our 2019 target and creates more headroom for quality asset growth.

“This is paving the way for sustained improvement in asset quality and a further reduction in impairment charges that will allow us to take advantage of enhanced earnings opportunities when they arise,”

Sterling Bank Plc reported 8.7 percent NPL as at H1 2019 while Union Bank Plc reported NPL ratio that dropped from 8.7 percent in 2018 to 7.1 percent in H1 2019.

Emeka Emuwa, the MD/CEO, UBN, said, “Our priorities in 2018 were three pronged – enhancing our productivity across board; tightening our loan portfolio (especially resolving key large exposures which drove the NPLs up significantly at the end of 2017); and optimising the bank’s capital and funding base.

“I am pleased to report that we made significant strides in each focus area. Notwithstanding a depressed economic environment and a challenging operating landscape, our efforts to optimise productivity delivered results.