By Emele Onu, 08.05.2010

The banking sector made a loss-after-tax of N848 billion in 2009 with profitability ratios becoming meaningless, according to reports by Agusto & Co.

The credit rating and research agency disclosed in its 2010 Banking Industry Report released in Lagos this week that “for the first time since we began tracking the banking industry 18 years ago, the industry recorded its worst performance in 2009.”

Agusto’s Head of Financial Institutions Ratings, Yinka Adelekan, said while unveiling the report: “ Non – performing loans of the industry stood at 36 per cent of total loans with a coverage ratio of 80 per cent, while 79 per cent of interest income was lost to non-performing loans, thereby eroding profitability.”

Agusto & Co noted that the banking industry’s capitalisation has been weakened as it has filtered away N2 trillion of capital on account of credit costs, adding that banks’ asset quality issues will also remain weak in the short-term.

 

The annual report analyses the financial condition of the banking sector by providing financial data and key performance indicators of the industry. It highlights capital raising activities, risk management practices and key regulatory changes in the banking industry.

 

The report also reviews Nigeria’s macroeconomic environment and its impact on the sector.
On the creation of the Asset Management Corporation of Nigeria(AMCOM), Agusto said that the company recently set up to absorb and restructure bad loans from banks, will help the banking sector’s asset quality issues.

“However, insider abuse and the weak economic climate are issues the industry will contend with in the short to medium term,” it stated.