Nigeria’s banking sector is expected to record stronger loan growth and more resilient earnings in 2026, driven largely by recent recapitalisation efforts and a gradually stabilising macroeconomic environment, according to analysts at Cordros Capital.
In its 2026 outlook report, Cordros stated that banks have significantly expanded their capital bases following recent recapitalisation efforts, amounting to N2.11 trillion across the system. This development is expected to support improved credit creation across the industry.
The firm projects sector loan growth to reach 13.4 percent year-on-year in 2026, up from 9.8 percent in 2025, as lower yields stimulate demand for credit, particularly among retail, SME, and mid-corporate borrowers.
“As yields decline, demand for credit typically strengthens,” Cordros noted, adding that while headline asset yields may soften, the volume effect from loan expansion should keep net interest income resilient.
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The report said repricing benefits from earlier naira devaluations will continue to support asset yields in the first half of 2026, creating a soft landing rather than a sharp compression in net interest margins (NIMs). Banks’ NIM is expected to moderate only slightly to 8.2 percent in 2026, compared with 8.6 percent in 2025 and 8.9 percent in 2024.
Overall, Cordros expects net interest income resilience to be more volume-driven, reflecting a healthier, more sustainable earnings model.
On asset quality, the report said provisioning pressures should moderate in 2026 following a sharp spike in 2025, which was triggered by the removal of Central Bank of Nigeria (CBN) pandemic-era forbearance.
“The removal of CBN forbearance triggered catch-up provisioning in 2025, lifting the sector’s cost of risk to 4.0 percent in 9M-25 from 1.7 percent in 9M-24,” Cordros said. With most of the regulatory cleanup now recognised, provisioning is expected to ease toward 2.8 percent in 2026.
However, analysts warned that the improvement could be short-lived. According to the report, a lower interest rate environment combined with renewed risk asset creation could introduce latent asset quality risk from 2027 onwards, especially as banks deepen lending to retail and SME segments.
“Probability of Default (POD) and Loss Given Default (LGD) metrics are structurally higher in these segments,” Cordros said, stressing that structural provisioning is likely to remain above pre-pandemic levels for the medium term.
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Cordros said capital ratios are expected to stabilise and improve in 2026 as banks absorb post-forbearance adjustments. The sector-wide capital adequacy ratio (CAR), which had dipped to 12.7 percent from 13.4 percent, is projected to recover to around 14.0 percent, supported by retained earnings and ongoing recapitalisation.
“Capital injections enhance banks’ ability to grow risk assets without breaching capital thresholds,” the report said, adding that stronger balance sheets will allow banks to finance larger-ticket transactions, expand regionally, and scale digital and payments infrastructure.
The transition to Basel III is also expected to strengthen sector resilience by improving capital quality, liquidity buffers, and risk management practices.
Despite the positive outlook, Cordros highlighted regulatory risk as a key concern, noting that “frequent policy shifts and evolving expectations may constrain balance sheet expansion, limit dividend payments, elevate costs, and reduce strategic flexibility.”
The firm also flagged the risk of a renewed asset quality cycle if credit expansion outpaces improvements in underwriting and risk management frameworks.
From a rates perspective, Cordros’ base case assumes a cumulative 300 basis point cut in the policy rate to 24.0 percent in 2026. Under this scenario, NIMs are expected to settle around 8.2 percent. A deeper 400 bps cut could push NIMs toward 8.0 percent, while a milder 200 bps easing could see margins hold closer to 8.4 percent.
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Cordros named Guaranty Trust Holding Company (GTCO) as its top banking pick for 2026, citing superior earnings quality, strong capital buffers, and cost leadership.
“At its current share price of N86.00, GTCO trades at 0.9x P/BV and 4.5x P/E,” the report said, with a target price of N115.19, implying a potential upside of 35.1 percent.
The firm highlighted GTCO’s clean loan book, noting that it was the only bank without forbearance exposures during the regulatory clean-up, as well as its industry-leading cost-to-income ratio and strong capital adequacy.
“GTCO is the only bank with a return on equity that exceeds its cost of equity,” Cordros said, adding that this positions the lender to sustain credit growth and deliver long-term value as macroeconomic conditions stabilise.