By Ayobami Adedinni
About five Tier-Two commercial banks that comprise Sterling Bank Plc, Diamond Bank and First City Monument Bank Plc have announced N117.4 billion provision for bad loans in half year ended June 30, 2017 over macro economic challenges and unsteady global oil prices.
Other two commercial banks include Union Bank of Nigeria Plc and Wema Bank Plc.
The above commercial banks made a provision of N106 billion provisions for bad loans in half year ended June 30, 2016.
Of the five commercial banks, Wema Bank followed by Diamond Bank provision for bad loans increased significantly while First City Monument Bank (FCMB) and Union Bank of Nigeria bad loan provision dropped.
Investigation by our correspondent showed that Wema Bank provision for bad loan in half year of 2017 increased significantly by 43.7 per cent to N88 million as against N61 million in half year of 2016.
In a statement, the Chief Executive Officer, Wema bank, Mr. Segun Oloketuyi, said, “In the first half of the year the Bank operated, in an uncertain and challenging domestic economic environment.
“While we recorded notable improvements in the second quarter of the year, especially around foreign currency management, the execution of fiscal policies and the continued tight monetary policy impacted on consumers’ disposable income and invariably on banking sector performance.”
He said the bank began the second half of the year with cautious optimism, especially around the implementation of the needed economic reforms and execution of the 2017 budget to ensure stimulation of economic growth.
“The expectation is that the country will exit recession in the 2018 financial year, but this will be dependent on a diligent execution of the reform programme,” he said.
However, Diamond Bank provision for bad loans closed the half year at N20 billion, an increase of seven per cent over N18.9 billion in half year of 2016 while Sterling Bank provision gained 11.4 per cent to N4billion as against N3.6 billion recorded in half year of 2016.
FCMB and Union Bank of Nigeria provision for bad loans dropped by 26.1 per cent and 38.8 per cent respectively.
FSDH Merchant Bank Limited in its Nigerian Banking Industry Report said, “The crash in crude oil prices and oil production, and the attendant slowdown in economic activities in Nigeria affected the performance of the banking industry in the last two years.
“A number of loan customers, both individuals and corporates are finding it difficult to meet their loan obligations leading to rising loan loss provisioning for the banks. This is also hampering the banks’ ability to create new loans. Nigerian banks are changing strategies in order to deal with the current economic challenges in order to satisfy all stakeholders.
“Despite the recent challenges, there are huge banking opportunities in the Nigerian economy. Nigerian banks need to develop more constructive strategies to increase their share of the non-oil sector in their loan portfolios.