The Nigerian Deposit Insurance Corporation (NDIC) has disclosed that the banking industry remains exposed to high credit risk as depicted by the high Non Performing Loans (NPLs) ratio of 11.70% as at 31st December, 2018.
This, the Corporation said, exceeded the maximum prudential threshold of 5%.
But the disclosure which was contained in the 2018 annual report of the corporation hosted in its website yesterday also indicates that it is still an improvement when compared with NPLs ratio of 14.84% recorded as at 31st December, 2017.
The report further highlighted that the banking industry NPLs decreased by 25.15% to ₦1.79 trillion in 2018 from ₦2.36trn in 2017. In the same vein, the NPLs to Shareholders’ Fund Ratio improved from 69.21% in 2017 to 57.50% in 2018.
The banking industry average Capital Adequacy Ratio (CAR) increased to 15.26% as at 31st December, 2018 from 10.23% as at 31st December, 2017, above the regulatory minimum of 10% and 15% for banks with national and international authorisation, respectively.
The increase in the CAR could be explained by the 44.88% increase in the total qualifying capital from ₦2,201.58 billion in 2017 to ₦3,189.55 billion in 2018 and complemented by the 2.89% decline in the Total Risk-Weighted Assets from ₦21,520.82 billion in 2017 to ₦20,898.71 billion in 2018.
The recapitalisation requirements declined from ₦1.57 trillion in 2017 to ₦704.88 billion as at 31st December, 2018. The banking industry unaudited profit before tax (PBT) significantly rose from ₦150 billion in 2017 to ₦310 billion in 2018. That could be attributed to a reduction in operating expenses by 25% from ₦440 billion in 2017 to ₦330 billion in 2018.
The Yield on Earning Assets increased from 2.62% as at 31st December, 2017 to 3.23% as at 31st December, 2018. Similarly, Return on Assets (ROA) rose to 0.88% as at 31st December, 2018 from 0.48% recorded as at 31st December, 2017.
Also, Return on Equity (ROE) increased from 4.70% as at 31st December, 2017 to 9.73% as at 31st December, 2018. A breakdown of the report showed that the total credit extended by the deposit Money banks (DMBs) to the domestic economy amounted to ₦15.29 trillion in 2018, representing a 3.90% decrease from the ₦15.91 trillion recorded 10 in 2017.