THE top five banks, otherwise known as Tier-1 banks (T-1 banks) will record 50 percent decline in loan growth rate in 2020. Analysts see a slow down to single from double digit growth recorded in 2019.
The banks are Access Bank, Guaranty Trust Bank, GTB; First Bank of Nigeria Limited, FBN; United Bank for Africa Plc, UBA; and Zenith Bank. The financial statement of the five banks show that their combined loans and advances rose to N10.65 trillion in 2019 from N8.57trillion 2018, translating to loan growth of 24.3 percent.
Further analysis shows that Access Bank recorded the highest loan growth of 46 percent, as lending increased to N2.91 trillion in 2019 from N1.99 trillion in 2018. Zenith Bank came second with loan growth of 26 percent in 2019 as lending rose to N2.3 trillion from N1.8 trillion in 2018. UBA came third with loan growth of 20 percent, as lending rose to N2 trillion from N1.7 trillion. The fourth highest loan growth of 11 percent was recorded by FBN which grew its lending to N1.87 trillion in 2019 from N1.68 trillion in 2018. GTB, on its part recorded loan growth of 10 percent as lending grew to N1.5 trillion in 2019 from N1.4 trillion in 2018. Analysts at Vetiva Capital Management Limited however projected that this double digit loan growth will not be repeated in 2020 citing a more competitive lending environment and adoption of cautious loan growth strategy. Thus they projected average loan growth of the T-1 banks to drop by half to eight percent in 2020 down from the 22.4 percent recorded in 2019. In their projection for UBA loan growth in 2020, the analysts stated: “Looking forward, we expect the bank to adopt a cautious loan growth strategy, thus we forecast a nine percent, year-on-year (YoY) growth in loans and advances in FY’20, down from19 percent in 2019, despite the minimum Loan to Deposit Ratio (LDR) requirement which the bank has thus far been unable to meet.” The Vetiva analysts also projected nine percent loan growth for GTB in 2020, saying: “The bank is unlikely to repeat the double-digit loan growth of FY’19, due to the competitive lending environment. We, however, still expect decent loan growth as management continues to drive credit supply. Moreover, the CBN’s squeeze on banks’ activity in the Fixed income space is likely to continue to push lenders to attempt issuing loans at competitive rates, a scenario which GTBank has not had as much joy in. Therefore, we forecast a nine percent YoY expansion in the bank’s loan-book, and a 50bps moderation in Non Performing Loans (NPLs) for FY’20″. Commenting on Zenith Bank loan growth in 2020, the analysts said: “We do not expect the bank to grow its loan book as aggressively in 2020 and foresee modest loan growth of five percent YoY. Furthermore, we expect the bank’s NPLs to moderate 50bps and expect lower provisions (-28%) y/y due to the modest loan growth and focus on asset quality.” The Vetiva analysts also projected a less aggressive loan book growth for FBN Holdings in 2020 saying: “In 2020, we foresee only a mild improvement in Net Interest Income due to the low-yield environment and less aggressive loan-book expansion.”