Eight Nigerian banks incurred a combined N156bn in impairment charges on credit and financial assets in the first quarter of 2025, according to an analysis by The PUNCH 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 N49.38bn for the period ended March 31. This marks an 11.8 per cent decline compared to the N55.97bn 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 N35.95bn, while investment securities N7.1bn, treasury bills N2.16bn, and other financial assets and due from banks N1.87bn and N2bn 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 N258.34bn to N311.83bn.

First HoldCo followed with a provision of N37.25bn in Q1 2025, down by 11.2 per cent from the N41.93bn posted in the same quarter of 2024. The impairment loss was primarily driven by an increase in provisions on loans and advances to customers N41.23bn, with marginal contributions from bad debt write-offs N8m, offset by reversals in other assets N3.9bn and off-balance sheet items N95m. Despite the provisioning, profit for the period stood at N171.10bn, a decline from N208.11bn in Q1 2024,

Access Holdings reported a net impairment charge of N21.77bn, representing a 4.5 per cent decline from the N22.79bn 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 N182.75bn from N159.29bn, a year-on-year increase of 14.7 per cent.

Guaranty Trust Holding Company declared a loan impairment charge of N13.42bn, slightly down from N13.49bn 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 N14.56bn. 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 N457.02bn in Q1 2024 to N258.03bn in Q1 2025.

United Bank for Africa recorded a total impairment charge of N14.18bn in the first quarter of 2025, up from N3.28bn in Q1 2024, representing a sharp 332.2 per cent increase. Increased allowances for credit losses on loans of N11.12bn and additional provisions on investment securities, placements, and other financial assets of N3.06bn 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 N142.58bn to N189.84bn.

FCMB posted an impairment charge of N9.52bn in Q1 2025, a notable 59.9 per cent drop from the N23.71bn recorded in the corresponding period of 2024. The decline was primarily due to substantial recoveries on previously written-off loans, which amounted to N4.11bn. Loan and advances impairment dropped significantly to N12.69bn from N23.96bn, while recoveries and fair value adjustments offset overall provisioning levels. Profit after tax improved to N32.23bn, up from N28.77bn.

Fidelity Bank reported an impairment charge of N8.66bn in the first quarter of 2025, marking a 285.8 per cent increase compared to N2.25bn 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 N1.82bn in Q1 2025, up 64.7 per cent from N1.10bn recorded in the same quarter last year. The increase reflects rising provisions on loans and advances N1.04bn, investment securities N51.78m, and other assets N411.23m, with some offsets from recoveries N272.02m. The spike in provisions points to expanding risk exposure as the bank grows its loan book.

In total, the eight banks incurred N156bn in impairment charges in Q1 2025, compared to N164.53bn 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, in an Interview with The PUNCH, 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.