Nigeria’s banking industry is
experiencing a “full blown financial crisis” as failed fiscal and
monetary policies lead to a credit crunch, according to Arqaam Capital.
Unity Bank Plc and Skye Bank Plc are
close to being insolvent while lenders FBN Holdings Plc and Sterling
Bank Plc “will need a dilutive capital hike,” Jaap Meijer and Tarek
Sleiman, analysts at the Dubai-based investment bank and brokerage, said
in an e-mailed note on Monday.
Banks’ capital ratios are set to worsen
because of currency depreciation and souring loans, they said. Calls to
Unity and Skye Bank weren’t immediately returned.
The central bank in July replaced the
management of Skye after the lender breached liquidity thresholds,
spurring concerns about the health of small- and medium-sized lenders,
and reviving memories of bank rescues by the government after the
financial crisis in 2009.
Nigerian banks are grappling with a
devaluation of the currency, rising bad loans and an oil-dependent
economy that’s set to record its first annual contraction in more than
two decades.
“Our acid test reveals seven under
capitalized banks” with a deficit of as much as 1 trillion naira ($3.2
billion) in the financial system, Meijer and Sleiman said. A stress test
identified FBN as the most under capitalized lender with Unity, Diamond
Bank Plc, Skye, FCMB Group Plc, Sterling and Fidelity Bank Plc also
showing deficits if they were to fully provide for non-performing loans,
according to Arqaam.
Common Challenges
Moody’s Investors Service said on Monday
that Nigeria’s five biggest banks share common credit challenges
related to the slowdown in the country’s oil and gas-dependent economy.
Moody’s expects non-performing loans to increase to about 12 percent
over the next 12 months.
The ratio of non-performing loans to
total credit rose to 11.7 percent at the end of June from 5.3 percent at
the end of 2015, the Abuja-based Central Bank of Nigeria, which
requires banks to keep the measure below 5 percent, said in a report on
its website.
Arqaam rates FBN, Skye, Sterling Stanbic
IBTC Holdings Plc, Unity and Ecobank Transnational Inc. as sell,
according to the report. Zenith Bank Plc, Access Bank Plc and United
Bank for Africa Plc are rated buy.
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