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Banks move to cut non-performing loans

By on December 25, 2014

Weighed down by rising non-performing loans, Deposit Money Banks have begun aggressive loan recovery exercises aimed at cutting down their NPLs.

It was learnt on Tuesday that the NPLS of many DMBs had risen above the regulatory threshold of five per cent of their total risk assets.

In order to avoid the Central Bank of Nigeria’s big hammer, which might come early next year, it was learnt that a good number of the lenders had written to their defaulting debtor customers asking them to settle their debts.

A number of the debtors have been given a deadline to settle their debts, according to bank officials familiar with the situation.

“Some banks are currently in aggressive loan recovery mode because of rising NPLs in their books. The CBN may hammer a number of them very soon; the central bank may force some of them to make provision for those loans. The banks don’t want anything that will further affect their books,” a top bank official said under condition of anonymity because he was not authorised to speak on the matter.

This came just as Ecobank Nigeria had given its defaulting debtor customers a 21-day ultimatum to regularise their obligations with it or risked legal action.

In one of the newspaper advertorials, the bank warned that “failure to regularise the debts may leave the bank with no further option than to publish the names and addresses of the defaulting debtors without further recourse to them and thereafter commence vigorous recovery actions, using every available legal means to recover the debts.”

On Saturday, the Managing Director, Unity Bank Plc, Mr. James Semenitari, said the bank would commence an aggressive loan recovery exercise aimed reducing the NPLs of the bank, among other reasons.

“We have seen a number of receiverships being carried out by other banks; we will also do same next year, there is no hiding place for the debtors,” Semenitari said.

He added, “Our doors are open for sincere borrowers but not for fraudulent debtors. We are not shy to give out money but you must be ready to pay. To reduce NPLs is a task that must be done. It is a campaign, it is a crusade.”

Global rating agency, Fitch Ratings, had, in October, predicted that Nigerian banks faced lower profitability in 2015.

The agency also said the lenders’ NPLs might rise next year.

A top CBN official had recently said the central bank had given banks till January to reduce their NPLs or risked sanction. He said a number of the banks had crossed the five per cent regulatory threshold (NPLs ratio to total risk assets), while some were already above 10 per cent.

 

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