Nigeria: Big Five Banks' Loans to Customers Hit N50 Trillion in Five Years

26 July 2021

The five tier-1 banks in Nigeria gave out a total of N49.999 trillion as loans and advances to their customers between January 2016 and December 2020, data compiled by THISDAY have shown.

The banks are Access Bank Plc., Zenith Bank Plc., FBN Holdings Plc. (First Bank), United Bank for Africa Plc. (UBA), and Guaranty Trust Bank Plc. (GTBank). The data were gathered from the respective lenders' financial statements.

The data showed that in the five-year period, Access Bank lent out a total of N11.929 trillion to its customers. The amount lent by Access Bank rose sharply in the last two years due to its acquisition of former rival, Diamond Bank.

Access Bank was closely followed by Zenith Bank, whose total loans and advances in the review period stood at N11.297 trillion, despite its penchant for organic growth.

First Bank lent out a total of N9.825 trillion in the five year-period, UBA supported its customers with a total of N9.488 trillion, while GTBank lent N7.460 trillion to its customers within same period.

A further breakdown of the customers' loans and advances showed that Access Bank gave out a total of N3.218 trillion in 2020; N2.911 trillion in 2019; N1.994 trillion in 2018; N1.996 trillion in 2017; and N1.809 trillion in 2016.

For Zenith Bank, its total loans to customers in 2020 was N2.779 trillion; N2.305 trillion in 2019; N1.823 trillion in 2018; N2.100 trillion in 2017; and N2.289 trillion in 2016. In the same vein, FBN Holdings reported total customer loans and advances of N2.217 trillion in 2020; N1.852 trillion in 2019; N1.670 trillion in 2018; N2.001 trillion in 2017; and N2.084 trillion in 2016.

A breakdown of the five-year period for UBA showed that in 2020 it gave out a total of N2.555 trillion as loans to its customers spread across the continent, and did N2.061 trillion in 2019, N1.715 trillion in 2018, N1.651 trillion in 2017, and N1.505 trillion in 2016.

For GTBank, in 2020 it gave out a total of N1.663 trillion as loans to its customers; N1.500 trillion in 2019; N1.259 trillion in 2018; N1.448 trillion in 2017; and N1.589 trillion in 2016.

Despite the relatively high aggregate loan, experts say there is need for financial institutions to do more considering the country's wide infrastructure gap, which reports indicate would require about $3 trillion over the next 30 years to close.

Global management consulting firm, Mckinsey & Company, noted in a recent report that the unprecedented scale of the COVID-19 slowed down bank lending in Nigeria and forced the financial institutions to re-examine and reimagine the way they did things.

The report said, "For financially strong tier-1 banks with scale (resilient and market leaders), now is the time to consider investing in technology infrastructure and talent to expand beyond current customers and products.

"The COVID-19 pandemic and other on-going pressures present the sector with a new vantage point from which to address structural vulnerabilities and position itself for sustainable long-term growth."

To thrive beyond the crisis, Nigerian banks would need to bolster their capital levels and grow capital faster than the rates of inflation and devaluation, the report noted.

The report said, "This will be no small feat in the current environment. Given the need to meet Basel III requirements, the possible deterioration of asset quality, and some foreign-exchange-based commitments to service, it is likely that another round of consolidation and capital raising is approaching."

On their part, Senior Analyst at Coronation Asset Management, Ope Ani, and the company's Head of Research, Guy Czartoryski, told THISDAY in a recent interview that loan growth in the present climate remained challenging, as it increased risk pressure and asset quality concerns for banks.

They pointed out that an improvement in structural issues and the overall macro environment would help assuage the concerns and spur loan growth.

The analysts stated, "Recent developments around credit infrastructure (collateral registries, credit bureaus) have certainly been positive with respect to driving risk asset creation. So, there is a foundation for banks to increase their loan books going forward. However, loan growth also needs to be looked at in the context of capital.

"The distribution of capital across the banks featured in the report is unequal in terms of the percentage of total capital to assets (or, more technically, interest-earning assets). We have seen some banks hold back by not wanting to increase capital and actually changing their strategy to maximise the returns from the loan portfolios that they already have.

"So, for loan growth to take place, and because it requires capital, it is necessary to achieve and maintain a certain level of profitability. Of course, the regulator's response, in the middle of 2019, was to impose the loan-to-deposit ratio (LDR) regime that requires banks to make customer loans equivalent to 65 per cent of their deposits.

"This worked very well in 2019, with overall gross loans rising sharply. However, once most banks were compliant with it, the effects of the policy were not as strong during 2020."

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