Abuja, Nigeria – Na very serious matter dey happen for Naija banks as new research note from Renaissance Capital unleash some hot tea about banks wey dey ojoro with forbearance loans. According to the report titled “Nigerian Banks, Cash is King,” na so dem banks fit suspend their dividend payments for years as dem try meet the new rules wey Central Bank of Nigeria (CBN) don put in place. E be like say CBN wan make sure say these banks stop dey play small-small and face reality.
CBN drop this gbola on June 13, wey command all the banks with unresolved forbearance loans to chill on handing out dividend, stop directors from collecting new plantation na big bonuses, and even freeze any new foreign investments. (Na which kind wahala dem dey try avoid again?) Dem dey rush to strong-gate their capital because e no sweet to see banks wan break the Single Obligor Limit (SOL).
As per the fresh report, expect say the banks dem go hold on to any dividends until dem don provision fully for their forbearance exposure. E be like sey for some banks, analyst wey dey work with Renaissance believe say both interim and final dividends go dey on ice for God knows how long. Na the first part of this wahala start when one earlier report come out show say almost all Naija banks dey dance with some level of forbearance loans. Na true talk sha! But this new report don update with better gist.
From the figures wey dem bring come, Zenith Bank dey hold the highest forbearance exposure, with staggering $1.6 billion, followed by FirstBank with $887 million, and Access Bank with $304 million. (Chai, money no be water oo!) Other notable names wey dey carry heavy forbearance exposure include Fidelity Bank ($296 million), UBA ($282 million), and FCMB ($134 million). Comot for the small banks, dem dey still confirm the figures, but e no clear wetin dem go feed talk.
But wetin dey vex, sources wey relate to Zenith Bank talk sey dem dey plan to clear their forbearance loans by the end of the year. Dey even dey brag say dem profit fit cover for all the troubles wey forbearance bring. Na so e be, true but no be every bank get such luck. Meanwhile, the report don show say cash profits don become more important than wetin dem dey report as earnings. (We don’t need Pastor to tell us say plenty reports don lie.) Dem dey use IFRS rules wey allow banks to recognize interest income from those Stage 2 loans as if dem don collect am. But later, dem go find out say money no dey show for real world.
In the meantime, banks like Access, FirstBank, and Zenith don already get Amigo status with new orders from CBN to suspend any dividend action until the banks don deal with their forbearance and solvency issues. The way I see am, dem dey plan to push any hope of dividend payment till at least 2028! (Wetin dem go dey use whole four years to do?)
Main reports show say shareholders of First HoldCo – parent company of FirstBank – dey expect better things as dem maintain strong backing for recaps. Now e remain to see how other players go manage the forbearance wahala and safeguard their investment.
At the risk of sounding like those ‘I-told-you-so’ prophets, e don clear say the forbearance matter go still dey weigh dem banks down for long due to the high cost and liquidity pressures wey dey loom for dey horizon. No matter how we yarn am, investors for this Nigerian banking market need to start watching their pockets closely, cause maintaining cash profits will be the real test of their financial sanity moving forward.
