9mobile’s sale to be concluded  in 6 months – Report

A recent report by Renaissance Capital research team has indicated that big-ticket loans and weakness in the risk management framework were the cause of pressure on the Non-Performing Loan (NPL) books of banks in the country.

Data from the CBN shows that sector NPLs are yet to peak, with the NPL ratio increasing to 15.2% in May 2017, from 13.6% in February 2017.

FBNH reported an NPL ratio of 22% in 1H17, down from 26% in FY16. Similarly, Ecobank Nigeria’s NPL ratio of 8.9% in 1H17 came in marginally lower than the 9.1% reported in FY16. FBNH’s major troubled loan, Atlantic Energy, represents 5% of its loan book.

The report also revealed that, banks that are more exposed to the retail and SME segments have been adversely affected.

Stanbic and FCMB have the highest exposure to the retail segment at 35% and  29%, respectively, and the highest NPL ratios (excluding FBNH) in the sector.

This is not surprising, according to the report, given that the retail segment and SME segments of the loan book was adversely affected by staff layoffs, FX scarcity and the impact of naira devaluation.

It states that one common trend in the 1H17 numbers was the Quarter on Quarter (QoQ) spike in impairment charges, driven by the telecommunications and transportation sectors and largely from two high profile names, Arik Air and 9Mobile (formerly Etisalat Nigeria).

“From our conversations with the banks, we understand that they have appointed two external advisors to drive the 9Mobile sale process, and a few international and local investors have expressed interest in acquiring the asset.

“The banks expect that the sale of 9Mobile will be concluded within the next six months. Nonetheless, they have not adopted a standardised approach in making provisions on this exposure, understandably so given differences in the type of exposure’’, the report stated.

GTBank and SIBTC’s exposure to 9Mobile are NGN42.0bn and NGN7.6bn, respectively (under a syndicated facility), and both have made collective provisions of 14% and 59% of their exposures, respectively.  FBNH’s (NGN23.5bn) and UBA’s (NGN38.0bn) exposures are mostly fully secured under the syndicated facility, and they are comfortable with only making the prudential requirement provisions of 2% on performing loans.

In addition to its exposure in the syndicated loan, the report stated that Zenith has a portion of its exposure under an unsecured bilateral agreement, which is the reason for its 30% provision against its total NGN64-68bn exposure.

Access Bank has an exposure of NGN11bn under the syndicated facility, but also indirect exposures through contracts amounting to N35-39bn. The bank has taken an NGN4bn collective provision on its exposure.

The research team said during its meetings with the banks, they tried to get a sense of what other exposures could be potential systemic risks. The banks think it is unlikely that we will see another big exposure become an NPL threat to the sector. “One bank expressed the view that “most of all the high risks names are down already”

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