Reports have shown that the Nigerian banking sector’s profit declined by 28.4 percent in the 2015 financial year.
This revelation is made in the just released Afrinvest 2016 Banking Sector Report.
According to the report, “The resilience of the Nigerian banking sector was put to test as elevated risk concerns triggered a spike in NPL ratio and slowed the pace of credit expansion dramatically”.
The report further highlighted foreign exchange volatility and lower oil price as major reasons for the decline in the fortune of the sector.
The report read in part, “Gross loans and advances dipped by 1.9 per cent in 2015 across our coverage universe compared to the 26.6 per cent growth in 2014 as lower oil prices, FX volatility and liquidity concerns dampened risk appetite amidst a hazy economic road map.
Also, the report noted that “growth in industry gross earnings moderated to 10.3 per cent in 2015 (compared to 14.6 per cent in 2014). At the same time, liquidity in the banking system (especially among Tier-2 banks) was pressured by the TSA implementation, which sterilised approximately N1.2tn from the banking system.”
According to it, “As a result, sector profitability was depressed in 2015 with profit before tax tumbling by 28.4 per cent year-on-year as industry NPL ratio spiked to 4.9 per cent from three per cent in 2014.
“Furthermore, return on equity moderated to 9.1 per cent from 15.5 per cent in 2014. Capital adequacy ratio was strained on account of revised computation guidelines and increase in general loan loss provisioning, settling at 16.5 per cent in 2015 (relative to 19.7 per cent in 2014). Total deposits dipped by 1.8 per cent to N20.7tn, while total assets (+3.3 per cent ) and liabilities (+1.1 per cent) increased.”
The report, released in Lagos on Wednesday, is the 11th edition in the series as compiled by Afrinvest West Africa Limited.
It was launched by the former governor of Central Bank of Nigeria and Emir of Kano, Muhammadu Sanusi in an event that also had economists, bankers and captains of industries in attendance.