Only 10 Nigerian banks are sound – NDIC

The Nigeria Deposit Insurance Corporation (NDIC) has said that only ten banks operating in the country were sound as at the end of 2012.

The NDIC, which made this known in its 2012 annual report and statement of account released yesterday also revealed that the number of reported fraud cases increased by 43.7 per cent, from 2,352 in 2011 to 3,380.

According to the report, 10 banks were rated sound, nine satisfactory, while one bank was rated marginal, adding that the industry could be considered to be relatively stable in 2012 as there was no unsound bank in the industry as at the end of the year.

To ascertain the soundness of the banks, NDIC said it collaborated with the Central Bank of Nigeria (CBN) to conduct a risk-based examination of the financial institutions.

'The NDIC, in collaboration with the Central Bank of Nigeria, CBN, conducted Risk-Based Examination of 16 Deposit Money Banks (DMBs) during the year. The NDIC led the examination of six of the banks, while the CBN led in 10.

'Furthermore, the two institutions conducted a maiden examination of the three banks acquired by Assets Management Corporation of Nigeria, AMCON, namely: Keystone Bank, Mainstreet Bank and Enterprise Bank during the year. While the CBN led the examination of Mainstreet Bank and Enterprise Bank, NDIC led the examination of Keystone Bank,' the report said.

The NDIC also said DMBs lost N4.52bn to fraud in 2012, an increase of N455m or 10.9 per cent compared with the N4.072bn loss reported in 2011. It said DMBs reported 3,380 fraud cases involving the sum of N17.97bn with expected/contingent loss of about N4.52bn in 2012.

The expected/contingent loss had increased by N455m (10.9 per cent) as against N4.072bn reported in 2011. The report said the banking industry was adequately capitalised in the year under review with capital adequacy ratio of 18.07 per cent compared to 17.71 per cent recorded in 2011.

'All the DMBs also met the minimum liquidity threshold of 30 per cent. The asset quality significantly improved during the year as the ratio of nonperforming loans to total loans decreased from 4.95 per cent in 2011 to 3.51 per cent in 2012.

'The improvement in the banking industry's asset quality was due to the purchase of the non-performing loans of DMBs by Assets Management Corporation of Nigeria, AMCON and the enhanced credit risk management by DMBs.

'The overall effect was an improvement in the industry's profit before tax, which increased from a loss of N6.71bn in 2011 to a profit of N525.34bn in 2012,' the report said.

The banking industry, the report noted, recorded significant improvement in its financial condition and performance during the year as revealed by all major financial indicators compared to the previous year, saying that the improvement reflected on the banking industry's total assets which grew from N21.89trn in 2011 to N24.58trn in 2012, a growth of 10.91 per cent.

'Out of the total industry's assets of N24.58trn, total loans and advances stood at N8.15trn, representing over 33 per cent (one-third of total assets). Of the banking industry's total loans, the sum of N4.48trn or 54.97 per cent was extended to the real sector of the economy in 2012 as against N3.88trn or 53.37 per cent and N3.51trn or 48.95 per cent in 2011 and 2010, respectively.

'Of particular note was the rising trend in the banking industry's credits to the Agricultural Sector, which stood at 3.60 per cent of total loans and advances in 2012 compared to 2.15 per cent and 3.11 per cent recorded in 2010 and 2011, respectively,' the report noted.

The NDIC said it paid a cumulative sum of N6.82bn to 528, 212 insured depositors of closed banks by December 31, 2012 as against N6.68bn paid to 527, 942 insured depositors as at December 31, 2011.

According to the corporation, the feat was achieved in spite of the long closure of the banks and the unwillingness of many depositors to file for their claims.

'Similarly, a total sum of N2.505bn was paid to 75,322 verified depositors of 95 out of 103 closed MFBs during the year as against the sum of N2.249bn paid to 72,062 verified depositors in 2011. Also, the sum of N73.58bn had been paid as liquidation dividend to 250,209 depositors of DMBs as at December 31, 2012.

'It is pertinent to indicate that a total of 14 out of the 34 banks-in-liquidation prior to 2006 had declared a final dividend of 100 per cent of their total deposits, indicating that all depositors of the affected closed banks had fully recovered their deposits.

'From the foregoing, it can be observed that the Corporation continued to discharge its mandate of payment guarantee, supervision, failure resolution and liquidation in an effective and efficient manner during the year under review.

'The achievements attained in 2012 were due to many factors, which included the deployment of a robust performance management system, enhancement of the enterprise risk management system as well as enhanced capacity building in risk-based supervision, RBS, and other areas of operations, amongst others.

'In addition, the Corporation continued to partner effectively with all key stakeholders, particularly members of the Financial Services Regulation Coordinating Committee, FSRCC,' NDIC said.