Banks to tighten lending conditions for corporate loans in Q2’19

 Banks to tighten lending conditions for corporate loans in Q2’19

The Deposit Money Banks have said they will tighten lending condition for granting corporate loans in the second quarter of 2019 (Q2’19). The Central Bank of Nigeria (CBN) disclosed this in a report titled: ‘Credit Condition Survey” for first quarter of 2019 (Q1’19) released yesterday. The report among other things revealed that banks intend to demand stronger loan covenants and more collateral for corporate loans. The survey also indicated that the level of non-performing loans (NPLs) declined in the first quarter of 2019 (Q1’19). The report stated: “Lenders required stronger loan covenants from all firm sized businesses in Q1 2019. However, they reported that they would require stronger loan covenants for all firm sized businesses except for small business, which they plan to leave unchanged, in the next quarter. For the current quarter, fees/commissions on approved new loan applications fell for all firm sized businesses except for small business; while for Q2 2019 lenders expect fees/commissions on approved new loan applications to fall for all firm sized businesses except for OFCs.

“More collateral requirements were demanded from all firm sizes on approved new loan application in Q1’19. Similarly, lenders will demand for more collateral from all firm sizes in the next quarter.” On level of performance of NPLs, it stated: “Lenders experienced lower default rates on credit card and on overdrafts/personal lending to households in the current quarter. They expect improvement in default rates in the next quarter for all loan types. Losses given default on total unsecured loans to households and overdraft/personal loans to households improved in Q1’19 and were expected to improve in the next quarter. “Secured loan performance, as measured by default rates, improved in Q1’19 and is expected to improve in Q2’19. Similarly, bank lenders reported lower losses given default by households in both the current and next quarters. “Corporate loan performance as measured by the default rates improved for small businesses and large PNFCs. Lenders still expect lower default rates on lending to all sized businesses in the next quarter.”

Ayomide Oyewole

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