The impairment charges for risk assets of the six leading banks jumped by N46.542 billion or 102 per cent in the first (H1) of the year ended
In the 2019 full year, impairment charges by the leading lenders had declined significantly as a result of improved risk management and recovery strategies.
Although some of the banks recorded an increase, while others recorded a decline in the first-quarter (Q1) of 2020, all the top banks have witnessed a significant jump in impairment charges at the end of the first half of 2020 due to the negative impact of COVID-19.
A breakdown showed that
The impairment charges of
While the impairment charges do not mean outright losses, financial research analysts said the banks are raising their provisions so as to adequately cover the impact of COVID-19 on businesses.
In view of the impact of COVID-19 on the businesses and the banking sector particularly,
"Notwithstanding, NPLs are expected to spike in the event of any stress to the system, which could easily cascade into wider systemic frailty. On the whole, we remain negative on the banking sector, especially as asset quality is expected to have come under pressure during the pandemic," it said.
In their comments on the outlook for the year, analysts at
"In 2020, we expect banks to be more aggressive at growing their loan books. When considered in the context of the banks that were penalised in
They had explained that they expect a more aggressive lending drive by the larger banks in 2020, noting that this implies that fixed term deposit rates would be low as the banks move to optimise deposit growth to meet the required LDR.
"To aggressively grow their loan books, we expect the banks to strengthen their risk management framework to support credit origination. Beyond regulation, CBN's expansionary stance, which is expected to keep the yield environment low, will also propel banks to seek out outlets for funds, especially in riskier assets to optimise earnings yield.
"Notably, the observed improvement in industry NPL, which moderated to a four-year low of 6.7 per cent in Q3-19, gives the impression that the default rate is moderating. Hence, the bank should be more willing to expand their loan books. The above notwithstanding, we do not expect loan growth to revert to the 2012-2015 levels, given that banks will be more cautious in their credit origination and deployment going forward," they said.
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