Looking back at the FY-2019 earnings season, a major recurring theme among Banks was the paltry growth in loan books as they remained cautious towards credit expansion. Yet, a glance at the CBN’s credit conditions survey report for Q1-19 showed that lenders increased the supply of credit in Q1-19 and indicated a willingness to further increase the supply of secured credit to households and corporates amid an improving macro-economic backdrop.
Meanwhile, following a deterioration in the performance of unsecured loans to households in Q1-19, a contraction in credit supply and further tightening in the credit scoring criteria was hinted for the segment.
On the demand front, the report showed an increase in demand for unsecured household and corporate credit with a decline in demand for secured household lending – traceable to the tightening of credit scoring criteria. Additionally, more collateral requirements were demanded from all firm sizes on new loan applications in Q1-19.
Looking into Q2-19, while lenders hinted on their expectation of increased credit demand and increased credit supply (save for unsecured lending), they have also stated that they will demand more collateral from all firm sizes. Overall, despite increased demand and an improved macro-economic outlook, we see modest growth in bank’s loan books in 2019 as yields remain attractive in the OMO and T-bills space.
United Capital Plc Research (UCR)
