There are clear indications that bad or Non-Performing Loans (NPL) may account for as much as 34 per cent loss of profits in the banking industry.
Analysis of the first quarter of 2016 operating results of the banks has revealed that ten banks may have to make provisions to the tune of N174 billion this year in respect of the NPLs. This figure represents 34% of their possible profitability for the year.
Nigerian banks are battling with huge portfolios of NPLs due to economic downturn, which has led to business failures and defaults in debt repayments by individuals and businesses.
This translates to losses for investors in the bank as the money lost to bad debtors would have increased Return-on-Investment and dividend payments to shareholders.
The ten banks are UBA, GTB, Access Bank, Zenith Bank, FBN Holdings, Ecobank Transnational, Union Bank, Diamond Bank, Sterling Bank and Wema Bank.
Audited financial statements of the ten major banks for 2015 shows that nine of the banks have had to make provisions to the tune of N345 Billion in respect of the NPL (impairment to credit losses ), in 2015. This represent 87 per cent of the total profit of the nine banks declared for 2015
Analysis of the 2015 audited financial statements of the ten banks revealed that, apart from Wema Bank which has made money from recovering bad loans, the nine other banks recorded sharp increases in money lost to bad loans
In 2014, investors in the nine banks recorded a loss of N144 billion to bad loans, this however rose by 140 per cent or N201 billion in 2015.
Investors in FBN Holdings and EcoBank suffered 65.5 per cent or N224.5 billion of the money lost to bad loans in the nine banks while investors in FBN Holdings lost N119.3 billion in 2015, up from N25.9 billion in 2014, just as investors in Ecobank lost N105.2 billion up from N44.4 billion in 2014
However, investors in the top five banks namely UBA, Access Bank, GT Bank, Zenith Bank and FBN Holdings suffered 48 per cent or N166.5 billion of the total losses.