From ISAAC ANUMIHE, Abuja
The Nigeria Deposit Insurance Corporation (NDIC) yesterday revealed that there are only five sound banks in the country, even as it stated there are no unsound banks. Whereas 13 of the banks are satisfactory, two of them are just marginal, says the deposit insurer. In its 2011 Annual Report and Statements of Accounts, NDIC said the Deposit Money Banks (DMBs) were categorised under A to E, which means, A–Very Sound, B–Sound, C–Satisfactory, D–Marginal and E–Unsound, adding that there are no banks in the country that satisfied the condition to be in the category of Very Sound Bank and that there are no unsound banks at the end of 2011 fiscal year.
However, the report added that two banks are in the marginal category and that the combined total assets of the two marginal banks stood at N560.02 billion or 3.07 per cent of the industry’s total assets. Also, in the 2010 fiscal year, the NDIC said that in collaboration with the Central Bank of Nigeria (CBN), it carried out a joint target examination of the insured DMBs, where the findings at the end showed extreme weakness in corporate governance, weak credit examination, improvement in industry assets quality, arising largely from the sale of non-performing loans to Assets Management Company of Nigeria (AMCON), insider credit in excess of 10 per cent paid-up capital, concentration of credits and inadequate capital in some banks and credit in excess of single obligor limit.
The report also noted that in the Risk Based Supervision audit carried out by the two regulators in the banking sector, the examination revealed poor corporate governance practices, poor risk management arising from inadequate manpower and training of risk management personnel and absence of defined overall risk appetite by the banks. However, the report further noted that notwithstanding the level of soundness of the banks, the report showed that all the banks but nine of them recorded significant improvement in the financial condition and performance in their 2011 report.
It said that the banking industry capital position was strong during the year under review, while the equity capital decreased by about 11.81 per cent from N249.71 billion in December 2010 to N220.21 billion in 2011 the reserved increased substantially to N2,266 billion in 2011 from N179.89 billion in 2010. Also, the adjusted shareholders’ funds increased to N1.93 trillion in 2011 from N312.36 billion in 2010 resulting in the improvement of capital adequacy ratio of the DMBs from 4.06 per cent in December 2010 to 17.71 per cent in December 2011.
Also, the asset quality of banks improved during the period under review as the banking industry loans in totality stood at N7.31trillion, an increase of N2.04 per cent over the N7.16 trillion reported in 2010. The industry volume of non-performing loans also reduced significantly by N651.70 billion or 60.47 per cent from N1.08 trillion in December 2010 to N425.96 billion in the period under review. Regarding earnings and profitability, report noted that the total operating income of the industry stood at N2.33 trillion in December 2011, representing an increase of 7.90 per cent over the N2.16 trillion reported in 2010.
Similarly, the total operating expenses increased from N932,53 billion in December 2010 to N1.79 trillion in December 2011. To this effect, the industry recorded a loss of N6.17 billion in December 2011 as against a profit of N607.34 billion recorded in December 2010. Nine banks, according to the report, reported losses at the end of 2011 which resulted in the negative Return on Assets and Return on Equity and adversely affected the industry performance during the period under review.
However, the yield on earning assets also dropped to 10.05 per cent as at December 2011 from 11.24 per cent in December 2010. As for liquidity and fund management, the report indicated a strong liquidity position for the industry in the period under review saying that the average liquidity ratio rose from 51.77 per cent in December 2010 to 65.69 per cent in December 2011. The report also listed the banks examined which include, Access Bank Plc, Citibank Nigeria Limited, Diamond Bank Plc, Enterprise Bank, Ecobank Plc, Fidelity Bank, First Bank Plc,
First City Monument Bank, Guaranty Trust Bank and Keystone Bank. Also, examined include, Mainstreet Bank, Standard Chartered Bank Nigeria Limited, Skye Bank Plc, Stanbic IBTC Bank Plc, Sterling Bank Plc, United Bank for Africa Plc, Union Bank Plc, Unity Bank Plc, Wema Bank Plc and Zenith Bank Plc.