Some Nigerian Banks such as FCMB, Fidelity bank and Access Holdings will see a surge in non-performing loans (NPLs) once they begin to reclassify current loans that are under forbearance in line with a recent regulatory directive.
“If credit exposures are reclassified to stage 3, this would lead to a spike in NPL ratio,” Cardinal Stone Partners analysts said in a research note released today.
The potential impact of reclassification of estimated loan forbearance on Full Year 2024 NPLs assuming no write-offs is expected to be 14.3% for First City Monument Bank (FCMB). Fidelity Bank NPLs will jump to 13.1% while Access Holdings will see its NPLs more than double to 7%, according to Cardinal Stone Partners.
The Central Bank of Nigeria (CBN) in a recent directive on June 13, 2025, temporarily suspended dividend payments, bonuses, and foreign subsidiary investments for banks under regulatory forbearance.
The prudential measure targeted institutions benefiting from credit or Single Obligor Limit (SOL) forbearance arrangements.
“The new directive is expected to significantly increase loan provisioning for affected banks, which should, in turn, lead to higher impairments and possibly lower net earnings for the sector in Full Year (FY) 2025 vs FY 2024,” Cardinal Stone Partners said.
For Access Holdings, Cardinal Stone analysts noted that increased provisioning in the face of a high cost-to-income ratio of 58.8% (vs mean of 43.62% for tier-1 peers) was concerning.
In terms of impact for FCMB, Cardinal Stone expects the tier-2 bank to play the long game in dealing with its forbearance exposures, with its forecasts indicating limited capacity to fully absorb them in the current year without recording losses and hurting capital adequacy ratios.
Fidelity Bank’s forbearance loans constitute approximately 10.0% of its gross loans, which amounts to N458.3 billion using FY 2024 gross loans of N4.6 trillion.
“We have a conservative view that the exit of the forbearance positions may also lead to a rise in stage 3 loans for Fidelity bank in the near term,” Cardinal Stone Partners said.
“We also expect FIDELITY Bank to play the long game in resolving the forbearance exposure given limited capacity to fully absorb the impact in the current financial year. This could have negative implications for dividend payments.”
FCMB in a statement to the NGX yesterday said its Nigerian Banking Subsidiary currently has loans under CBN forbearance (credit exposures to 3 entities and 2 obligors) amounting to ₦207.6 billion as at 31st May 2025, which are currently classified as Stage 2 loans.
“The Bank has made provisions for these loans over the last few years, and intensified resolution efforts have led to over 60% reduction in its credit forbearance exposures. Once these loans exit the CBN forbearance regime, we anticipate that this would lead to an initial spike in Stage 3 loans to ~11.5% of the total loan book which would decline below 10% by the end of the financial year, based on anticipated loan book growth,” FCMB said.
Fidelity Bank in its own statement said its exposure under the SOL forbearance relates to two obligors and that the bank is confident that the exposure will be brought within the applicable regulatory limit in H1 2025.
“With respect to the forbearance granted on other credit facilities, the Bank confirms that this applies to four customers. We have proactively made substantial provisions on these facilities and have taken targeted and comprehensive steps to ensure full provisioning or return of the accounts to performing status by June 30, 2025,” Fidelity Bank said.
Access Holdings said it will comply with the apex bank’s directive by June 30, 2025, while maintaining strong capital buffers and paying dividend to its shareholders.
