The Nigerian Deposit Insurance Corporation (NDIC) has disclosed that the banking industry remains vulnerable to high credit risk as depicted by the high Non Performing Loans (NPLs) ratio of 11.70 percent as at 31st December, 2018.
This, the Corporation said, exceeded the maximum prudential threshold of 5percent
But the disclosure which was contained in the 2018 annual report of the corporation hosted in its website also indicates that it is still an improvement when compared with NPLs ratio of 14.84percent 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 ¦ 2.36tr 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 authorization, 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 b in 2018 and complemented by the 2.89% decline in the Total Risk-Weighted Assets from ¦ 21,520.82 b in 2017 to ¦ 20,898.71 b in 2018.
The recapitalization requirements declined from ¦ 1.57 tr in 2017 to ¦ 704.88 b as at 31st December, 2018. The banking industry unaudited profit before tax (PBT) significantly rose from ¦ 150 b in 2017 to ¦ 310 b in 2018. That could be attributed to a reduction in operating expenses by 25% from ¦ 440 b in 2017 to ¦ 330 b 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 tr in 2018, representing a 3.90% decrease from the ¦ 15.91 tr recorded 10 in 2017.