On the back of improvement in loan quality, the average Non-Performing Loans (NPLs) of eight Deposit Money Banks (DMBs), increased to 4.99 per cent in 2024 financial year compared to 3.82 per cent in 2023 financial year, an independent investigation by THISDAY has revealed.
The DMBs investigated by THISDAY are: First Holdings Plc, Access Holdings, Guaranty Trust Holding Company Plc (GTCO), Zenith Bank Plc, Wema Bank Plc, Fidelity Bank Plc, FCMB Group Plc and Stanbic IBTC Holdings Plc.
As of 2024, the Central Bank of Nigeria (CBN) reported a decline in the banking sector NPL ratio to 4.50 per cent, down from 4.58 per cent September 2024.
However, most DMBs reported record earnings, underpinned by wider net interest margins. However, this profitability comes at a cost: rising defaults.
Elevated lending rates following hike in Monetary Policy Rate (MPR) to 27.50 per cent, double-digit inflation rate, among other factors have begun to strain borrowers’ ability to repay, contributing to the uptick in NPLs last year.
While the decline in some DMBs NPL ratio may seem encouraging, it masks troubling signs at some individual DMBs level, most especially First Holdco, FCMB Group, and GTCO with NPL ratio above the CBN 5 per cent threshold.
For instance, First Holdco breached the CBN’s five per cent regulatory NPL threshold, recording a ratio of 10.20 per cent in 2024, from 4.70 per cent in 2023. First Holdco hits one of its height NPL ratio of 26.0 per cent in 2018 and the reported 10.20 per cent in 2024 is the second height in over 10 years.
First Holdco explained to analysts and investors that excluding the oil and gas name, the NPL ratio would have been 5.4per cent in 2024.
According to the financial institution, the growth in NPLs is driven primarily by only one oil and gas loan from which proactive steps have been taken to sustain the resilience of its balance sheet.
“In addition, the Oil & Gas Portfolio has been largely driven by the exchange rate impact. Loan book, continuously being derisked, showcase prudent and proactive approach to risk mitigation that strengthens long-term financial position.
“Excluding the oil and gas name, the NPL ratio would have been 5.4 per cent. On the back of the robust risk management capacity, NPLs are expected to reduce to normalised levels over the year,” the lender explained.
Similarly, FCMB Group declared NPL of 6 per cent in 2024 from 4.30 per cent in 2023, while GTCO’s NPL increased to 5.18 per cent in 2024 from 4.19 per cent in 2023.
The CBN continues to enforce a maximum NPL ratio of 5 per cent for banks, underscoring its commitment to maintaining financial stability and encouraging prudent lending practices.
However, other DMBs that managed to keep their NPL ratios below the 5 per cent per cent mark. For example, Access Holdings posted NPL of 2.76 per cent in 2024 from 2.78 per cent in 2023.
Stanbic IBTC rose to 4.18 per cent in 2024 from 2.35 per cent in 2023, Zenith Bank fell to 4.70 per cent from 4.40 per cent, while Fidelity Bank and Wema Bank’s NPL ratio slight improvements at 3.10 per cent and 3.86 per cent from 3.50 per cent and 4.31 per cent in 2023, respectively.
The eight banks NPL by value reached an estimated N2.59 trillion in 2024, according to an independent investigation by THISDAY. This is an increase of 101 per cent when compared to N1.29 trillion reported in 2023.
This is against the backdrop of a surge in gross customer loans, which expanded to N45.64 trillion, in 2024, representing an increase of nearly 40.6 per cent from N32.5 trillion in 2023.
One of the more striking trends in 2024 is the growing concentration of credit exposure to two traditionally high-risk sectors: oil and gas, and manufacturing. Loans to the oil and gas sector grew by 55 per cent to N11.5 trillion from N7.4 trillion in 2023. While manufacturing loans jumped 44 per cent to N6.6 trillion, from N4.6 trillion.
These sectors, often hit hardest by foreign exchange volatility and inflationary pressures, carry high latent risk. The growing concentration of exposure to these industries suggests that while banks have diversified loan volumes, they may be clustering around similar high-risk sectors.
According to analysts, the increase in gross customer loans was driven by naira devaluation and the pursuit of higher interest income in a high-rate environment
The breakdown showed that, First Holdco declared the highest NPL by value in 2024, reporting N1.23 trillion, about 211 per cent increase from N395.4billion in 2023.
Zenith Bank’s saw it NPL at N516.71billion in 2024 from N310.44billion, this increase was far outpaced by a 56 per cent surge in its total loan portfolio, which grew to N10.99 trillion from N7.06 trillion in 2023—helping dilute the impact on its NPL ratio.
Access Holdings, Nigeria’s largest lender by assets reported a N360.7billion NPL by value in 2024, up by 47 per cent from N246.14billion in 2023,
However, Access Holdings robust 43 per cent growth in its total loan portfolio to N13.07 trillion in 2024 helped moderate its overall credit risk profile.
GTCO Holdings’ NPLs surged by 38 per cent to N151.2 billion, from N109.6 billion despite just a 12 per cent increase in its loan book to N2.92 trillion. Also, FCMB closed 2024 with NPL value off N141.44billion, representing an increase of 79 per cent from N79.2billion in 2023.
Stanbic IBTC experienced a sharp 110 per cent rise in NPLs to N103.5 billion, while its loan book only grew by 18 per cent—signaling a worrying deterioration in asset quality.
As Fidelity Bank reported N141.34billion NPL by value in 2024, a growth of 25.3 per cent from N112.78 billion in 2023, Stanbic IBTC Holdings saw its NPL by value at N103.5billion in 2024, indicating an increase of 110.6 per cent when compared to N49.14billion in 2023.
In addition, Wema Bank said its NPL by value moved from N35.62 billion in 2023, an increase of 34 per cent when compared to N47.83billion in 2024.
Though the banks’ ability to expand their loan portfolios while maintaining broadly stable NPL ratios suggests resilience and sound underwriting practices, the rapid increase in nominal NPL volumes indicates that credit risk is mounting beneath the surface.
Analysts at S & P global rating in a report titled, “Nigerian Banking Outlook 2025: Resilient Performance Amid Macroeconomic Pressures,” said it the macroeconomic environment remains challenging, characterised by persistent high inflation and interest rates, a strained fiscal position, foreign currency (FX) supply constraints, and a weak Nigerian naira.
The analysts said it expected credit losses for the sector to remain elevated in 2025 at about 2.5per cent- three per cent compared with an estimated three per cent-3.5 per cent in 2024.
The global rating agency explained further that, “The elevated credit losses reflect the currency depreciation, as foreign currency loans account for 50per cent of banks’ loan books on average. The banking system’s dollarization has increased following the depreciation of the naira in 2023 and 2024.
“In addition, high interest rates and inflation have exerted pressure on borrowers’ creditworthiness, particularly for corporates in non-essential consumer goods sectors and import-dependent corporates that cannot fully pass through the high cost of inflation to consumers.
“We anticipate nominal NPL stock to increase by 14per cent, while the NPL ratio will likely decrease slightly to about 3.8per cent in 2025 from an estimated 4.3per cent in 2024 because of the increase in gross loans.”
