Globus Bank Loan Book Jumps 48% on Expansion Drive
Globus Bank Limited gets a top-notch rating on the lender’s sound risk position and healthy capital with an outlook accorded as stable amidst aggressive business penetration moves.
The bank sees its loan book rising amidst an expansion drive that started following its national license asset. Despite 48% growth in loan disbursement as of June 2022, GCR said Globus Bank has no non-performing loans.
In its recent rating note, GCR Ratings affirmed the bank’s national scale long and short-term issuer ratings of BBB-(NG) and A3 (NG) respectively with a stable outlook.
The bank’s stable outlook reflects GCR’s expectations that Globus will pursue its expansion and market deepening strategy while averting further weakening of its capitalisation and maintaining sound asset quality, funding and liquidity metrics.
The affirmation of the ratings of Globus Bank Limited balances its sound risk position and good funding and liquidity profile, against a modest competitive position, according to the rating note.
It stressed that GCR takes cognisance of the material decline in the capital level in June 2022, due to significant growth in risk assets.
Globus’s market share in terms of total assets and deposits is estimated at around 0.4% and 0.5% of the industry respectively, placing it at the lower end of the mid-sized banks in Nigeria, it said
Recall that the bank recently obtained a national license. In the rating note, GCR said this may provide an impetus for further geographical diversification across the country.
“Globus delivers core banking services to over 60,000 clients comprising corporate, institutional, and retail customers through a network of 16 branches, agency partnerships, as well as increased digitalisation of platforms, enabling greater customer reach and market penetration.
“The bank’s revenue is driven by stable sources, with interest income from loans to total interest income registering above 70% in June 2022 from 57.2% in December 2021 and 26.1% a year earlier, the rating firm explained.
The rating note stated that the bank’s competitive position is constrained by a short track record, concentration risk in terms of the twenty largest obligors as of December 2021, and limited geographical diversification.
For the bank, GCR said capitalisation remains a positive rating factor. It explained that Globus’s capital adequacy ratio has been consistently maintained above the regulatory minimum of 10%, registering at 18.8% in June 2022, though a decline when compared with 39.5%; registered in December 2021 and 43.6% in a similar period in 202 – driven by significant risk-weighted asset growth.
MarketForces Africa reported that Risk-Weighted Assets are the minimum amount of capital that a bank or other financial institution must hold to cover an unexpected loss
GCR’s total capital ratio declined to 20.9% in June 2022 compared with 39.5% in December 2021; and 43.6% a year earlier driven by the bank’s aggressive risk-weighted asset growth to N182 billion in June 2022 from N87 billion in December 2021.
“We also took cognisance of an additional N3 billion in deposit for shares, awaiting Central Bank’s approval as capital. We expect GCR’s core capital to remain within 20-23% over the next 12-18 months as the bank continues to grow its risk assets, amidst a possible equity injection”, GCR said. READ:GCR Upgrades NEM Insurance on Sustained Earnings Strength
The bank’s core deposits as a percentage of the funding base displayed continuous improvement from 65.7% in December 2020 to 76.7% in December 2021 and 77.6% in June 2022.
However, funding is largely comprised of wholesale deposits from corporate and financial institutions. GCR’s long-term and stable funding ratio registered at 93.0% and 79.7% in December 2021 compared with 88.5% and 91.2% in 2020 respectively.
Liquidity remains good, with the regulatory liquidity (minimum of 30%) ratio registering at 38% in December 2021 from 88% in 2020, albeit declined due to large loan disbursements. In the rating note, GCR said the bank’s liquid assets coverage of customer deposits and wholesale funding measured at 30.9% and 14.8x in December 2021.
Globus’s credit risk metrics were maintained at sound levels over the review period with no non-performing loans since inception.
Per management, the bank focuses its lending towards good-credit quality corporate entities and financial institutions, with a strong appetite for loan book growth, up 48% in June 2022.
Also, the bank’s credit losses moderated to -0.4% in December 2021 from 2.6% in December 2020, which compares very well to peers in the industry, according to the rating note. GCR said it takes cognisance of the gradual and sustained reduction in the loan book concentration, in line with management’s strategy of diversifying the loan book.
Globus bank’s top twenty obligors’ contribution to gross loans and advances moderated to 57.9% in December 2021 from 77.1% in 2020, GCR stated. However, sectorial concentration increased year-over-year, with exposures to the manufacturing, financial institutions, and agriculture sectors aggregating 76.0% in December 2021 from 63.8% in December 2020.
Similarly, foreign currency loans to gross loans and advances increased slightly to 25.5% in December 2021 from 20.5% in December 2020, albeit remain below the industry average of about 30%.
# Globus Bank Loan Book Jumps 48% on Expansion Drive#