COVID-19: How the pandemic has impacted Nigeria’s top lenders

The third-quarter earnings for Nigeria's tier-one lenders have revealed a mixed performance amidst the challenges posed by the global pandemic. Joshua Odebisi, a Senior Banking Analyst at Vetiva Capital, shed light on the common denominators observed in the earnings reports. Despite lower MPOs in Q3 compared to the previous quarter, banks such as Zenith and UBA exhibited a significant increase in loan provisions year on year. However, Odebisi emphasized that the overall trend is manageable due to the banks' proactive restructuring efforts and extended repayment periods amidst a weak macro environment. The prevailing low yield environment in the fixed income market has posed challenges for banks' interest income. While interest expense decreased for most banks, interest income saw a mixed performance. Odebisi acknowledged the dual impact of reduced expenses and income on the banks. Looking ahead, he highlighted the need for banks to focus on non-interest income lines and explore innovative strategies to enhance returns on investment. In response to the outlook for earnings, Odebisi emphasized the importance of banks diversifying their revenue streams and leveraging opportunities in the commercial paper market. He noted that banks such as Access Bank have already demonstrated success in increasing non-interest income. Additionally, he pointed out the potential benefits that currency devaluation could bring to banks with long net total positions. Overall, Odebisi underscored the importance of strategic decision-making and prudent financial management to navigate the evolving landscape of Nigeria's banking sector in the wake of the pandemic. As the sector continues to adapt to the challenges posed by COVID-19, the key focus for Nigeria's top lenders lies in striking a balance between managing asset quality, optimizing interest income, and exploring new avenues for revenue generation. With an eye on innovation and strategic diversification, banks are poised to weather the storm and drive sustainable growth in the post-pandemic era.