How ₦590 Billion In Non-Performing Loans Crashed Heritage Bank

Despite initial denials of a liquidation process from deposit insurer NDIC, Nigeria’s Central Bank announced the revocation of Heritage Bank’s banking licence for ceasing to “carry on in Nigeria the type of banking business for which the licence was issued for any continuous period of six months.”

Heritage Bank has struggled with huge Non-performing loans for years and on social media, many commenters were surprised it took so long for Heritage’s licence to be revoked.  Heritage is thought to have one of the worst NPL ratios in the banking industry.

According to internal documents seen by Truetells Nigeria, at least 90% of the bank’s active loan portfolio of around ₦700 billion was considered lost or doubtful as of March 31, 2024. The bank’s tier-1 capital comprising equity, reserves, and accumulated earnings was in the deficit of over ₦1 Trillion.

Internal documents showed that less then 5% of outstanding loans were performing, with 90% classified as lost. Some of those loans date back to 2018 when the bank reported loan impairment of ₦37.5 billion in the first half of 2018.

According to people familiar with internal conversations, the bank was considering a host of strategies like storming the residences of defaulters with available security resources, employing debt recovery agents, sale of pledged property, and engagement with ex-staff.

Depositors will get up to $3,300 in relief following Heritage Bank’s liquidation

One NDIC official who asked not to be named said depositors will access their deposits as quickly as Wednesday.

Regulators will begin to find a buyer for the bank and in the interim, a bridge bank will be created to take over the bank’s failed assets and liabilities, allowing customers to continue accessing their deposits and banking services uninterrupted.
The last time a Nigerian bank—Skye Bank—was liquidated, Polaris Bank took over Skye Bank with a ₦786 billion cash injection.