By Michael Eboh
Access Bank Plc gave out loans, totaling N572.997 billion to energy firms in two years, between 2013 and 2014. This was even as the bank is fined N174 million for various contraventions in the course of its operations in 2014. A breakdown of the loans, according to information obtained from the bank’s financial statement for the year ended, December 31, 2014, showed that the Bank gave out a total of N243.065 billion and N329.923 billion in 2013 and 2014 financial year respectively.
The exposure of the bank to the energy sector in 2014 represents an increase of N86.867 billion or 35.74 per cent from the exposure in 2013. However, analysts are of the view that following the uncertainty in the global oil and gas and the declining price of crude oil in the international market, the bank will be faced with a daunting challenge in recouping the money loaned out to energy firms.
They argued that the bank stands the risk of a large chunk of the loans becoming bad debts, as majority of the energy firms will likely be faced with difficulties in repaying their loans. Specifically, they said about 40 per cent of the bank’s total loans within the two year period might be impaired.
Further breakdown of the loans revealed as follows:
- Downstream oil and gas firms – N139.792 billion and N128.04 billion servicing companies – N49.892 billion and N89.344 billion
- Upstream companies – N39.834 billion
- Crude oil refining – N26.158 billion in 2014 only,
- Power and energy companies – N13.547 billion and N23.236 billion.
- Other Bank customers – N1.896 trillion split into N786.17 billion in 2013 and N1.110 trillion in 2014.
To this end, the proportion of energy sector loans to total loans and advances stood at 30.22 per cent for both years. Furthermore, the proportion of energy sector loans to total loans and advances stood at 30.92 per cent and 29.72 per cent for 2013 and 2014 in that order. However, Access Bank already posted N25.262 billion as ‘past due and impaired loans and advances’ to corporate organisations in 2014, and N21.033 billion in 2013.
Allowance for impairment was N7.968 billion in 2014, and N6.805 billion in 2013, while the bank put the carrying amount of the loans and advances at N17.293 billion in 2014, compared to N14.229 billion in 2013. Despite fears over the ability of the bank to recoup the loans, the bank said the Directors are confident in their ability to continue to control exposure to credit risk, which can result from both its loans and advances portfolio and debt securities.
Sanctions for flouting CBN rules
To crown the losses, Access Bank paid the sum of N184 million as sanctions meted out against the bank in 2014 by the Central Bank of Nigeria, CBN, for various infractions in the course of its operations. Specifically, the bank was fined N174 million for contravening the reporting of public sector deposits in line with CBN guidelines, and additional fine of N2 million each for five other contraventions.
The contraventions included in the financial statement are:
- Lack of CBN approval for the additions to investment properties of N5.15 billion as at 30 September 2013.
- Non-Implementation of the recommendation per management letter on long outstanding items in CBN and Real Time Gross Settlement, RTGS accounts.
- Weaknesses noted in its internal control and Know Your Customer, KYC procedures.
- Flouting of CBN foreign exchange manual in selling N2 million business travel allowance to an expatriate with an expired passport.
- Flouting of the minimum documentation in the credit file for some customers in line with the CBN prudential guidelines for deposit money banks.