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Despite relative stability and gradual return to profit, banks’ third quarter results show that they are still reluctant to expand their asset creation in respect to loan grants, especially to the private sector.

“An analysis of the key parameters on the balance sheet shows that UBA total assets remained relatively flat, declining marginally by 0.4 percent,” Afrinvest, an investment banking and research firm, said.

“We also observed a decline in the bank’s lending activities in quarter three. The bank’s loan portfolio was subsequently down by 4.2 percent to N636.2 billion, from the N664.2 billion reported in quarter two 2010,” the firm added.

“The bank’s inability to grow its loan book during the quarter led to a slow growth in net interest income. The Q3 net interest income of N27.1 billion falls short of an average of N33.9 billion reported in Q1 and Q2. We expect the bank to be more aggressive in its risk generation appetite and also channel more of its assets into higher income earning assets.

“Currently, 24.2 percent (N402.5 billion) of the bank’s total assets are placed in the inter-bank market where yields were an average of 7.9 percent during the quarter,” the firm further said.

Guaranty Trust Bank’s third quarter result, however, reveals that loans and advances to customers increased to N545 billion, from N532 billion at the end of quarter two, 2010.

Central Bank’s policy not reflecting

Samir Gadio, emerging Markets Strategist, Standard Bank, said the Central Bank’s accommodative policy stance between 2009 and September 2010 has not really reflected in lending to the real sector.

“According to the Central Bank, the growth rate in credit to the private sector fell to a record low of 4.5 percent year on year (y/y ) in August, from 9.8 percent y/y in July and 18.1 percent y/y in June. Although aggregate private sector credit extension edged up 2.0 percent in monthly terms to N10.1trillion, from N9.9 trillion in July, it has only increased 0.4 percent year to date (Ytd).

“This means the Central Bank’s accommodative policy stance between 2009 and September 2010 has not resulted in a turnaround in lending to the real economy, which we think reflects the intrinsic weakness of the monetary transmission mechanism, amid structural issues in the banking system,” Mr. Gadio said.

Experts have said the tightening in monetary conditions during the last Monetary Policy Committee, held in September, is likely to further impact credit dynamics as the Central Bank hiked the standing deposit facility by 225 basis points (bpts) to 3.25 percent. This, they say, may curtail liquidity and place upward pressure on money market rates.

However, a source at Spring Bank said the bank’s lending is fast improving.

“I can’t speak for other banks, but I know Spring Bank is lending. Even if you want a loan, just come to the bank and get a form. Once you meet with the basic requirements, why won’t you get a loan?” he said.