2018 Report: Banks’ 106% Profit Upsurge Excites NDIC

• NPLs record 25% drop

BY COBHAM NSA, ABUJA – The Nigeria Deposit Insurance Corporation (NDIC) has given kudos to the banking industry for recording over 106 per cent profitability raise in the year 2018.

According to the Corporation, this profitability upsurge from N150 billion in 2017 to N310 billion in 2018 is due to obvious reduction in operating expenses that declined by 25 per cent from N440 billion in 2017 to N330 billion in 2018.

Similarly, the NDIC acknowledged minimal worries over the sector’s Non Performing Loans (NPLs) ratio as the figures declined by 25.15 per cent from N2.36 trillion in 2017 to N1.79 trillion in the year under review.

In its 2018 annual report released on Wednesday, NDIC said the good news also extends to improvements witnessed in all the key performance indices of Deposit Money Banks (DMBs) in 2018, including Capital Adequacy Ratio (CAR), and Liquidity Ratio

The report said the industry’s unaudited Profit Before Tax (PBT) increased significantly from N150 billion in 2017 to N310 billion in 2018, noting thus; “That could be attributed to a reduction in operating expenses by 25 percent from N440 billion in 2017 to N330 billion in 2018. The Yield on Earning Assets increased from 2.62 percent as at December 31, 2017 to 3.23 percent as at December 31, 2018.”

The Corporation also disclosed that; “Return on Assets (ROA) rose to 0.88 per cent as at December 31, 2018 from 0.48 per cent recorded as at December 31, 2017″ while Return on Equity (ROE) moved from 4.70 per cent as at December 31, 2017 to 9.73 percent in December 31, 2018.

Furthermore, the report stated that; “The banking industry average Capital Adequacy Ratio (CAR) increased to 15.26 per cent as at December 31, 2018 from 10.23 per cent as at December 31, 2017, above the regulatory minimum of 10 per cent and 15 per cent for banks with national and international authorisation, respectively.

‘’The increase in CAR could be explained by the 44.88 percent increase in the total qualifying capital from N2.2 trillion in 2017 to N3.18 trillion in 2018 and complemented by the 2.89 percent decline in the Total Risk-Weighted Assets from N21.52 trillion in 2017 to N20.89 trillion in 2018.”

The Corporation also noted that recapitalisation requirements dropped to N704.88 billion as at December 31, 2018 compared to the 2017 figure of N1.57 trillion.

On facilities available to customers in the sector, the report said; “Total credit extended by the DMBs to the domestic economy amounted to N15.29 trillion in 2018, representing a 3.90 per cent  decrease from the N15.91 trillion recorded in 2017.”

Acknowledging that the banking industry witnessed an elevated credit risk exposure given the high NPLs ratio of 11.70 percent as at December 31, 2018, the NDIC said it is however heartwarming that there was noticeable improvement compared to the NPLs ratio of 14.84 per cent recorded in December 31, 2017.

‘’The industry NPLs ratio of 11.70 per cent exceeded the maximum prudential threshold of five (5) per cent for DMBs. In the same vein, the NPLs to Shareholders’ Fund Ratio improved from 69.21 per cent  in 2017 to 57.50 per cent  in 2018.”

‘’The analysis of sectoral allocation of credit by DMBs shows that the sector with highest credit concentration in 2018 was the oil and gas. The level of DMBs exposure to the Oil & Gas Sector stood at ¦ 4.66 trillion or 30.46 percent of the industry total credits of ¦ 15.29 trillion as at December 31, 2018.

Signposting the nation’s manufacturing sector as second on the risk exposure index, the report identified it with about N2.25 trillion or 14.71 per cent of total credits, closely followed by the government with N1.34 trillion or 8.78 per cent of the total credit facilities.

Other sectors on the list include General Commerce that has N1.14 trillion or 7.44 per cent of total credits to its name; the Finance & Insurance; with 6.49 per cent and General sectors saddled with six (6) per cent of total credit