Friday, November 02, 2018 11:09 AM / CBN

Banking Sector Soundness 

The health ofbanks improved in the review period, following the sustained recovery inmacroeconomic conditions, including declining inflation, stable exchange rateand gradual upswing in the real economy. At end-June 2018, the industry averagecapital adequacy ratio (CAR) was 12.08 per cent, compared with 10.23 per centand 11.51 per cent at end-December 2017 and end-June 2017, respectively. Thedevelopment reflected the increase in banks’ total qualifying capital. Theindustry threshold, however, remained at 15.0 per cent for banks withinternational authorisation and 10.0 per cent for banks with either national orregional authorisation. 

Asset quality ofthe banking industry, measured by the ratio of nonperforming loans to totalloans (NPL ratio) fell to 12.45 per cent at end-June 2018, compared with 14.80per cent and 15.02 per cent at end-December 2017 and end-June 2017,respectively. At this level, the ratio, remained above the regulatory thresholdof 5.0 per cent. The decrease in the NPL ratio reflected the effect of thefavourable macroeconomic conditions and stricter prudential regulation. 

To furtherconsolidate on the improvement, the CBN directed banks to intensify efforts atdebt recovery, realisation of collateral for lost facilities and strengtheningtheir risk management processes. Loan loss provision was 75.74 per cent atend-June 2018, as against 80.4 per cent in the corresponding period of 2017.The industry liquidity ratio increased to 46.09 per cent at the end of thefirst half of 2018, from 45.8 per cent at end-June 2017, reflecting the rise inthe stock of liquid assets held by banks. 

With theexception of three (3) commercial banks, all others met the minimum regulatoryliquidity ratios of 30.0 per cent for commercial banks; 20.0 per cent formerchant banks; and 10.0 per cent for non-interest banks, at end-June 2018

DownloadFull PDF Report Here – 2018 CBN Half Year Economic Report

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