Macro-economic challenges: UBA, Zenith Bank, 9 others write off N202.4bn loans

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By Ayobami Adedinni

Due to the prevailing macro economic headwinds, 11 commercial banks had a write-off of N202.4 billion loans in 2016, a directive approved by the Central Bank of Nigeria last year.

 The apex bank last year had said all banks in the country could write off non-performing loans in 2016 over dwindling global oil prices and local macro economic challenges.

 A commercial bank can write off loan when it is deemed uncollectible or that proceeds from collateral will not be sufficient to pay back the entire exposure.

 Of the 11 banks, six Tier- II banks had a write –off of N91.33 billion in 2016 as against N50.48 billion in 2015 while five Tier-I banks wrote-off N111 billion in 2016, an increase of 119 per cent from N37 billion in 2015.

 Investigation by Nigerian NewsDirect shows that United Bank of Africa Plc overdrafts and term loans loan write-offs gained 950 per cent to N7.5 billion in 2016 from N714million in 2015.

 The pan-African bank disclosed that Loans written off to individual customers in 2016 was N4.74 billion as against N115 million in 2015.

 UBA loan written off to corporate bodies rose by 361 per cent to N2.76 billion in 2016 from N599 million in 2015.

 Zenith Bank’s collective loan write-offs moved from N375 million in 2015 to N9.1 billion in 2016.

 First Bank of Nigeria Holdings reported N61.45 billion loan write-offs in 2016 from N22.6 billion in 2015.

 Furthermore, Diamond Bank Plc in 2016 reported the highest write-off in value of about N47 billion, 34.7 per cent increase over N34.98 billion reported in 2015.

 Following Diamond Bank is Union Bank of Nigeria Plc with about 67 per cent increase in write-offs from N12.7 billion in 2015 to N21.23 billion reported in 2016.

 Sterling Bank Plc, another Tier-II bank reported 735 per cent increase in loan write-offs to N17.99 billion in 2016 compared with N2.15 billion in 2015.

 Fidelity Bank Plc and Wema Bank reported N3.39 billion and N689 million write offs in 2016, 25.2 per cent and six per cent increase over N2.7 billion and N650 million reported in 2015.

 Meanwhile, Stanbic IBTC Holdings Plc’s reported N920 million write-offs in 2016.

 Specifically, GTBank loans write-offs to non – individuals rose by 46 per cent to N17.93 billion in 2016 from N12.27 billion in 2015 while Access Bank write-offs grew by 1,202 per cent from N1.13 billion to N14.69 billion in 2015.

 Banks had initially written to the CBN to allow them remove non-performing loans from their balance sheet, contravening the provisions of Section 3.21 (a) of the prudential guidelines.

 According to a CBN circular, “The CBN acknowledges the request by banks to amend the requirements of S.3.21 (a) of the prudential Guidelines, which mandates banks to retain in their records, fully provided Non-performing Loans (NPLs) for a period of one year before write-off,” the circular read.

 “The CBN has no intention to repeal the provision of the above mentioned section of the guidelines. In view of the current macro-economic challenges however, the CBN hereby grants a one-off forbearance, this year 2016, to banks, to write-off fully provided NPLs without waiting for the mandatory one year.”

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