Banks to tighten criteria on corporate loans—CBN

The Central Bank of Nigeria, CBN, has said banks will tighten criteria for corporate loans in the third quarter of the year. 

The apex bank said the criteria include more collateral, stronger loan covenants and higher fees/commissions for corporate loans. 

CBN disclosed this in its Credit Condition Survey, CCS, report for the second quarter. 

The report also indicated that though there was a decline in the availability of corporate loans  in the second quarter of the year, banks intend to reverse this trend in the third quarter.  

The report stated: “The overall availability of credit to the corporate sector decreased in the second quarter, but was expected to increase in third. 

“This was driven by favourable economic conditions, changing sector-specific risks, changing appetite for risk, market share objectives and changing liquidity positions. “Lenders reported that the prevailing commercial property prices positively influenced credit availability of the commercial real estate sector in the current quarter. 

“Lenders expect the prevailing commercial property prices to positively influence secured lending to public non-financial corpora-tions in the current quarter.” “Availability of credit increased for all business sizes in Q2 2019. Lenders expect the same trend in the next quarter. 

Spreads between bank rates and MPR on approved new loan applications narrowed for all business, except for small business, in Q2 2019, but were expected to widen for all business sizes in Q3 2019. 

“The proportion of loan applications approved for all business sizes increased in the current quarter, and are expected to further increase in Q3 2019. “Lenders required stronger loan covenants from all firm sized businesses in the current quarter. 

Similarly, 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 large PNFCs, while for Q3 2019 lenders expect fees/commissions on approved new loan applications to rise for all firm sized businesses except for large PNFCs. “More collateral requirements were demanded from all firm sizes on approved new loan application in Q2 2019, except for large PNFCs. 

However, lenders will demand for more collateral from all firm sizes in the next quarter.”