Eight leading Nigerian banks recorded a combined N156 billion in impairment charges on credit and financial assets during the first quarter of 2025, based on an analysis of their unaudited financial results submitted to the Nigerian Exchange Limited.

Impairment charges—also known as credit or loan losses—are provisions made by banks to account for potential defaults or a decline in the value of financial assets. These charges reflect the cost of credit risk in a challenging macroeconomic environment shaped by high inflation, naira depreciation, and reduced liquidity across consumer and business sectors.

A review of the banks' filings reveals varying degrees of credit risk exposure and provisioning strategies. While some banks posted a decline in impairment charges, others saw significant increases.

Zenith Bank led the group with the highest impairment charge, reporting N49.38 billion for Q1 2025. This marks an 11.8% drop from the N55.97 billion recorded in the same period in 2024. The decrease may point to improved asset quality or more aggressive loan recovery efforts. Loans and advances accounted for N35.95 billion of the total, followed by N7.1 billion in investment securities, N2.16 billion in treasury bills, and provisions of N1.87 billion and N2 billion for other financial assets and bank placements, respectively. Despite the high provisioning, Zenith Bank posted a 20.7% increase in profit after tax, rising from N258.34 billion to N311.83 billion.

First HoldCo followed with N37.25 billion in provisions, representing an 11.2% reduction from N41.93 billion in Q1 2024. Most of the impairment came from loans and advances (N41.23 billion), slightly offset by reversals in other assets (N3.9 billion), off-balance sheet items (N95 million), and minor write-offs. Profit after tax, however, declined to N171.10 billion from N208.11 billion.

Access Holdings reported a net impairment charge of N21.77 billion—a 4.5% decrease from N22.79 billion in Q1 2024. The decline was attributed to reduced charges on investment securities and the absence of write-backs on pledged assets. This, along with improved cost control and revenue growth, helped lift the group’s profit after tax by 14.7%, reaching N182.75 billion from N159.29 billion.

Guaranty Trust Holding Company (GTCO) posted N13.42 billion in impairment charges, slightly lower than N13.49 billion in Q1 2024. The stability in provisions suggests consistent asset quality. The majority of the impairment stemmed from Stage 3 loans (credit-impaired), while recoveries from Stage 1 and 2 loans helped offset the total. Despite the steady provisioning, profit after tax fell sharply by 43.6%, from N457.02 billion to N258.03 billion.

United Bank for Africa (UBA) saw a dramatic rise in impairment charges, reporting N14.18 billion for Q1 2025—up 332.2% from N3.28 billion in the prior-year period. The increase was driven by N11.12 billion in loan loss provisions and N3.06 billion from investment securities and other financial assets. This surge highlights heightened credit risk, possibly linked to macroeconomic and currency-related pressures. Nevertheless, UBA grew its profit after tax by 33.1% to N189.84 billion from N142.58 billion.

FCMB reported impairment charges of N9.52 billion, a substantial 59.9% drop from N23.71 billion in Q1 2024. This decline was largely due to recoveries of N4.11 billion from previously written-off loans. Impairment on loans and advances dropped to N12.69 billion from N23.96 billion, helping push post-tax profit to N32.23 billion, up from N28.77 billion.

Fidelity Bank posted N8.66 billion in impairment charges, up 285.8% from N2.25 billion in Q1 2024. The bank’s financials indicate the charges included depreciation and amortisation, suggesting a broader asset write-down for the quarter.

Wema Bank incurred impairment charges of N1.82 billion, a 64.7% increase from N1.10 billion the previous year. This reflected increased provisions on loans and advances (N1.04 billion), investment securities (N51.78 million), and other assets (N411.23 million), partially offset by recoveries (N272.02 million). The rise indicates expanding risk as the bank scales its loan portfolio.

Overall, the N156 billion in impairment charges recorded by the eight banks in Q1 2025 represents a 5.2% decline from the N164.53 billion posted during the same period in 2024 (based on revised estimates). However, the figures show considerable differences across banks, reflecting diverse risk appetites, provisioning strategies, and the varying impacts of economic volatility on asset quality.

A financial analyst and CEO of Cowry Treasurers Limited, Charles Sanni, noted that the treatment of impairment charges reveals a bank’s risk tolerance and the strength of its credit monitoring framework.

Sanni explained that while some institutions take a conservative approach by aggressively writing off bad loans—what he called “biting the bullet”—others prefer to delay such actions to preserve earnings. According to him, banks with lower non-performing loan ratios tend to have stronger monitoring systems.

He also observed that since interest rates began climbing in 2024, forward-looking banks have become more cautious, focusing their lending on sectors sensitive to rate fluctuations and monitoring borrowers’ leverage levels more closely.

“Proactive banks are paying close attention to how leveraged their borrowers are because highly leveraged clients are more vulnerable in a high-interest environment,” he noted.

Sanni further stated that early recovery efforts and strategic loan structuring can reduce the need for high impairment provisions. However, the final outcome depends on each bank’s approach to risk management.

“Some banks securitize loans or use hedging mechanisms, while others prioritize earnings growth, even if it means carrying more non-performing loans. That can make earnings less predictable and more exposed to policy shifts,” he added.

He concluded by linking the growth in bank earnings to expanding loan volumes—driven by inflation. Sectors like oil and gas and manufacturing, which require substantial capital, are fueling this trend.

“As inflation continues, banks are lending more to meet working capital needs in capital-intensive industries. This supports earnings growth, provided the macroeconomic conditions don’t deteriorate further,” he said.