3 banks fail liquidity test

lamido sanusi
lamido sanusi
lamido sanusi
lamido sanusi

Amidst efforts by the Central Bank of Nigeria (CBN) to raise capacity of local banks’ to perform their statutory roles in the economy, a report released at the weekend has shown that three commercial banks failed the regulators, liquidity test conducted recently.

According to the report made available by the apex bank, the affected banks recorded negative liquidity ratios, following the application of a cumulative 30-day shock, even though it recognized that the overall banking industry remained resilient to liquidity shocks, in the face of vulnerability by a few.

According to the report, the pre-shock liquidity ratios for the banking industry, large, medium and small banks rose by 14.14, 19.47, 3.15 and 3.07 percentage points to 69.70, 70.22, 75.45 and 68.47 per cent, compared with that of end of December 2012.

“The banking industry was resilient to credit risk as the impact of the most severe credit risk shock (200 per cent rise in non -performing loans, NPLs) resulting in Capital Adequacy Ratios (CARs) of 11.99 per cent, which was 1.99 percentage points above the 10 per cent threshold,” it said.
The report also noted that the large and medium banks were less vulnerable to the most severe shock, as they maintained CARs of 13.58 and 11.35 per cent in contrast to the small banks where Capital Adequacy Ratios deteriorated to 2.39 from 18.33 per cent in December of 2012.
With this development, CBN noted that the affected institutions would be requiring about N96.03 billion to raise their CAR to 10 per cent.

A breakdown of the statistics showed that, 11 banks maintained CARs above 10 per cent, six banks had between five and 10 per cent, three banks had less than five per cent, but greater than zero per cent and three others recorded negative CARs.

It explained that Non-Performing Loans (NPLs) to total loans deteriorated to 3.7 per cent at end-June 2013, from 3.5 per cent at end- December 2012, but however remained within the 5 per cent threshold at end-June 2013.

“The NPL coverage ratio improved to 71.2 per cent at end-June 2013, from 68.7 per cent at end- December 2012, indicating a reduction in the risk exposure of the sector.

“Total deposits increased to N15,157 billion at end-June 2013, from N14,386 billion at end-December 2012, reflecting an increase of N771 billion or 5.35 per cent,” the report read in part.
Meanwhile Nigerian banking sector’s total bank loans and advances to the various sectors of the Nigerian economy grew by 5.2 per cent to N8.575 trillion in the first half of 2013.

CBN’s Financial Stability Report released at the weekend, disclosed that of the total amount, 18.7 per cent or N1.606 trillion was lent to solid minerals as a single sector which accounted for the highest share, followed by t r a n s p o r t and communications, 13.8 per cent or N1.184trillion, and manufacturing, 12.6 per cent or N1.082 trillion.
According to the report, agriculture increased by 60 basis points to 4.3 per cent from the end of the preceding period.

Furthermore, total loans increased to N8.814 trillion, from N8.150 trillion at end-December 2012, reflecting an increase of N664 billion or 8.1 per cent at end-June 2013.

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