Eight Nigerian banks incurred a combined ₦156 billion in impairment charges on credit and financial assets in the first quarter of 2025, according to an analysis of their unaudited financial statements filed on the Nigerian Exchange Limited recently.
The impairment charges, often referred to as loan losses or credit losses, reflect provisions set aside by banks to cover potential defaults and deterioration in the value of their financial assets. The figure represents the cost of risky lending and exposure to a volatile macroeconomic environment, including inflationary pressure, naira depreciation, and constrained consumer and business liquidity.
A bank-by-bank breakdown of the data shows varied exposure levels and provisioning strategies, with some banks reporting significant declines in impairment charges while others recorded notable increases.
In the period under review, Zenith Bank recorded the highest impairment charge among the eight banks, posting ₦49.38 billion for the period ended March 31. This marks an 11.8 per cent decline compared to the ₦55.97 billion reported in the same period of 2024.
The drop may be attributed to improved asset quality or aggressive loan recovery efforts within the bank. A breakdown of the total expected credit losses in Q1 2025 shows that loans and advances accounted for ₦35.95 billion, while investment securities ₦7.1 billion, treasury bills ₦2.16 billion, and other financial assets and due from banks ₦1.87 billion and ₦2 billion respectively also contributed to the provisions. Despite the high provisioning, Zenith delivered a bottom line, growing its profit after tax by 20.7 per cent from ₦258.34 billion to ₦311.83 billion.
First HoldCo followed with a provision of ₦37.25 billion in Q1 2025, down by 11.2 per cent from the ₦41.93 billion posted in the same quarter of 2024. The impairment loss was primarily driven by an increase in provisions on loans and advances to customers ₦41.23 billion, with marginal contributions from bad debt write-offs ₦8 million, offset by reversals in other assets ₦3.9 billion and off-balance sheet items ₦95 million. Despite the provisioning, profit for the period stood at ₦171.10 billion, a decline from ₦208.11 billion in Q1 2024,
Access Holdings reported a net impairment charge of ₦21.77 billion, representing a 4.5 per cent decline from the ₦22.79 billion reported in the first quarter of 2024. The reduction was partly due to the absence of impairment write-backs on pledged assets and a decrease in charges on investment securities for fair value through other comprehensive income.
This slight improvement suggests tighter risk management and credit monitoring practices. This modest improvement, combined with cost control and income growth, saw profit after tax rise to ₦182.75 billion from ₦159.29 billion, a year-on-year increase of 14.7 per cent.
Guaranty Trust Holding Company declared a loan impairment charge of ₦13.42 billion, slightly down from ₦13.49 billion in the same quarter of 2024, translating to a 0.5 per cent drop. The relatively stable impairment level suggests consistent asset quality within the group’s credit portfolio.
The breakdown showed that the majority of the impairment arose from Stage 3 loans considered credit-impaired, for which the bank provided ₦14.56 billion. In contrast, some recoveries and reversals from Stage 1 and Stage 2 loans helped offset the total. However, profit after tax fell sharply by 43.6 per cent, from ₦457.02 billion in Q1 2024 to ₦258.03 billion in Q1 2025.
United Bank for Africa recorded a total impairment charge of ₦14.18 billion in the first quarter of 2025, up from ₦3.28 billion in Q1 2024, representing a sharp 332.2 per cent increase. Increased allowances for credit losses on loans of ₦11.12 billion and additional provisions on investment securities, placements, and other financial assets of ₦3.06 billion drove this rise.
The spike indicates heightened credit risk within its lending and investment portfolios, potentially tied to macroeconomic challenges or foreign currency exposures. Despite this, the bank achieved a 33.1 per cent growth in profit after tax, moving from ₦142.58 billion to ₦189.84 billion.
FCMB posted an impairment charge of ₦9.52 billion in Q1 2025, a notable 59.9 per cent drop from the ₦23.71 billion recorded in the corresponding period of 2024. The decline was primarily due to substantial recoveries on previously written-off loans, which amounted to ₦4.11 billion. Loan and advances impairment dropped significantly to ₦12.69 billion from ₦23.96 billion, while recoveries and fair value adjustments offset overall provisioning levels. Profit after tax improved to ₦32.23 billion, up from ₦28.77 billion.
Fidelity Bank reported an impairment charge of ₦8.66 billion in the first quarter of 2025, marking a 285.8 per cent increase compared to ₦2.25 billion in Q1 2024. The bank’s statement showed the impairment was combined with depreciation and amortisation, indicating a broader asset write-down during the quarter.
Wema Bank posted a total impairment charge of ₦1.82 billion in Q1 2025, up 64.7 per cent from ₦1.10 billion recorded in the same quarter last year. The increase reflects rising provisions on loans and advances ₦1.04 billion, investment securities ₦51.78 million, and other assets ₦411.23 million, with some offsets from recoveries ₦272.02 million. The spike in provisions points to expanding risk exposure as the bank grows its loan book.
In total, the eight banks incurred ₦156 billion in impairment charges in Q1 2025, compared to ₦164.53 billion in the same period in 2024 from revised estimates, indicating a 5.2 per cent decline overall. However, while the aggregate number dropped, individual bank performance varied significantly. The trends reflect both the uneven impact of macroeconomic volatility on credit portfolios and the differing risk strategies adopted by banks.
The Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, said that the approach taken by Nigerian banks in treating impairment charges often reveals their appetite for risk and the strength of their internal credit monitoring frameworks.
Commenting on recent trends in impairment charges across the sector, Sanni said some banks are deliberately aggressive in writing off non-performing loans, a strategy he described as “biting the bullet.”
“Issues around impairment charges treatment are usually such that some banks are very bullish in loan loss provisioning, and they choose to be aggressive in write-offs of non-performing loans. This is like biting the bullet,” Sanni said.
He explained that lower non-performing loan ratios typically point to stronger loan monitoring systems within those banks. According to him, since interest rates began to rise in 2024, truly proactive banks have shifted focus toward sectors sensitive to rate movements and macroeconomic fluctuations.
“Proactive banks, especially since interest rates started rising in 2024, are carefully looking at sectors that are sensitive to rates in their operations and other market conditions. They check the gearing ratios, meaning how leveraged borrowers are, because those with high leverage are more vulnerable,” he stated.
Sanni added that early recovery efforts by banks can limit the level of impairment charges incurred, but ultimately, outcomes depend on individual banks’ strategies.
“It depends on what the bank wants to do and how it chooses to approach its risk management. Some are very efficient, securitizing some of their loans or using other strategies. But others may prioritize boosting income even if that means carrying more non-performing loans on their books. That strategy is risky, especially for banks exposed to sectors sensitive to macroeconomic policies. Earnings from such banks can become erratic and less sustainable,” he noted.
On the broader macroeconomic backdrop, the analyst observed that growth in bank earnings is being supported by increased loan volumes, a trend he attributes to inflationary pressures. He said sectors like manufacturing and oil and gas, which require significant working capital, are driving this expansion.
“Loan volumes have increased as a result of inflationary effects, and some of those earnings could be sustainable. When you look at sectors like oil and gas and manufacturing that need fresh capital, especially with rising prices, growth in earnings is expected to continue as long as inflation persists,” Sanni added.
The PUNCH