By Seun Ibiyemi
Nigeria’s banking sector is expected to record stronger loan growth and more resilient earnings in 2026, driven by recent recapitalisation efforts and a gradually stabilising macroeconomic environment, according to analysts at Cordros Capital.
In its 2026 outlook report, the investment firm noted that banks have significantly expanded their capital bases, with system-wide recapitalisation reaching N2.11 trillion.
This capital injection is expected to support higher credit creation, particularly in the retail, SME, and mid-corporate segments.
Consequently, the firm projected sector loan growth to rise to 13.4 per cent in 2026, up from 9.8 per cent in 2025.
While asset yields may soften as interest rates decline, Cordros stated that the expected volume expansion in loans would maintain net interest income resilience.
The report forecasts a moderate decline in banks’ net interest margins (NIMs) to 8.2 per cent, compared to 8.6 per cent in 2025.
On asset quality, provisioning pressures are expected to ease in 2026, following a spike in 2025 triggered by the removal of the Central Bank of Nigeria’s (CBN) pandemic-era forbearance. The sector’s cost of risk, which rose to 4.0 per cent in the first nine months of 2025, is projected to moderate to 2.8 per cent in the new year.
However, analysts warned that latent risks could emerge in 2027 as banks aggressively expand lending to the riskier retail and SME segments.
Cordros also highlighted that capital ratios are expected to stabilise, with the sector-wide capital adequacy ratio projected to recover to around 14.0 per cent. Stronger balance sheets will allow banks to finance larger transactions, expand regionally, and scale digital and payments infrastructure.
The transition to Basel III is further expected to enhance sector resilience through better capital quality, liquidity buffers, and improved risk management practices.
Despite the positive outlook, the report identified regulatory uncertainty as a lingering concern, noting that frequent policy shifts could potentially limit balance sheet expansion and strategic flexibility.
From an investment perspective, Cordros named Guaranty Trust Holding Company (GTCO) as its top banking pick for 2026, citing superior earnings quality, strong capital buffers, and cost leadership.
At its current share price of N86.00, GTCO is valued at 0.9x Price-to-Book Value (P/BV) and 4.5x Price-to-Earnings (P/E), with a target price of N115.19, implying a potential upside of 35.1 per cent.
The report underscored GTCO’s clean loan book, industry-leading cost-to-income ratio, and robust capital adequacy as key factors positioning it to sustain credit growth and deliver long-term value as Nigeria’s macroeconomic environment stabilises.