GCR Ratings has affirmed the national scale long- and short-term issuer ratings of LAPO Microfinance Bank Limited at BBB-(NG) and A3(NG) respectively, while revising the outlook from negative to stable, citing robust capitalisation despite liquidity concerns and modest competitive positioning.
In its latest credit opinion, GCR highlighted that LAPO’s strong capital base remains the bank’s primary rating strength. As of 31 December 2024, the microfinance lender posted a core capital ratio of 30.9%, down slightly from 33.8% in 2023 but still well above regulatory requirements. Its Capital Adequacy Ratio (CAR) also comfortably exceeded the 10% regulatory minimum for microfinance banks.
LAPO’s total assets increased to N125 billion, up from N104.6 billion in 2023, giving it an estimated 3% market share in Nigeria’s microfinance subsector. The bank is projecting further growth supported by a proposed N10 billion bond issuance, which is expected to enhance digital offerings and improve operational efficiency over the next 12 to 24 months.
However, GCR flagged weak asset quality metrics as a risk to the ratings. While non-performing loan (NPL) and credit loss ratios improved to 9.4% and 0.6%, the rating agency noted that these gains were largely the result of loan write-offs, not fundamental risk mitigation. The bank’s ability to sustain these improvements depends on its ongoing recovery efforts and improved collection channels.
On liquidity, GCR noted a low liquid asset coverage of just 7.3% of customer deposits and 0.2x of wholesale funding. While the bulk of LAPO’s funding (74.6%) comes from well-diversified customer deposits, the bank’s liquidity is vulnerable and must materially improve over the next 12 months to avoid downward pressure on ratings.
Funding is supported by relatively low-cost current and savings accounts (CASA), which make up 81.8% of total deposits, keeping the bank’s cost of funds at 6.6%—comparing favorably with the broader industry.
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