Agency rates Nigerian banks low

Lamido Sanusi, CBN Governor

PLAGUED by huge losses caused by non-performing loans, the banking sector may have witnessed, its worst performance in recent times ...

, going by an assessment of Agusto & Co.

Indeed, the effects of banking reform became glaring at the weekend as the 2010 Banking Industry Report released by the foremost credit rating and research agency, which put the nation’s bank fortune at all time low. Agusto & Co, in its 2010 Banking Industry Report released in Lagos at the weekend, stated that, “for the first time since we began tracking the (banking) industry 18 years ago, the industry recorded its worst performance in 2009,” Yinka Adelekan, Agusto’s Head of Financial Institutions Ratings said while unveiling the report.”

The yearly report analyses the financial condition of the banking sector by providing financial data and key performance indicators of the industry. It highlights capital raising activities, risk management practices and key regulatory changes in the banking industry. The report also reviews Nigeria’s macroeconomic environment and its impact on the sector.
The report shows that loss-after-tax for the banking sector stood at N848 billion with profitability ratios becoming meaningless. “Non-performing loans of the industry stood at 36 per cent of total loans with a coverage ratio of 80 per cent, while 79 per cent of interest income was lost to non-performing loans, thereby eroding profitability,” the report said. It noted that the banking industry’s capitalisation has been weakened as it has filtered away N2 trillion of capital on account of credit costs. The report also stated that the banks’ asset quality issues would also remain weak in the short term.

On the creation of the Asset Management Company (AMCOM), Agusto believes that the company recently set up to absorb and restructure bad loans from banks, will help the banking sector’s asset quality issues. “However, insider abuse and the weak economic climate are issues the industry will contend with in the short to medium term,” it stated.