Second-biggest Nigerian bank sees 2%-5% growth in loan book
Zenith Bank Plc, Nigeria’s second-biggest lender, is
increasing its focus on consumer lending as lower oil prices weigh on the
economy, hurting its business customers.
The Lagos-based bank is expecting to expand retail loans as
a percentage of total credit to about 4 percent this year from less than 1
percent in 2018, Chief Executive Officer Peter Amangbo said in interview at the
bank’s headquarters. It will achieve this by making a bigger push into personal
loans, car financing and mortgages, he said.
“There is a lot we’re doing on revenue,” Amangbo said. “We
expect our retail franchise to grow. Our electronic business, our digital
banking is growing.”
Zenith is making the shift as a 30 percent drop in oil
prices since October hinders the nation’s main export and foreign-currency
earner, damping demand for funding. Nigerian banks are increasingly tapping
into digital technology to reach the 50 million unbanked people in a nation of
200 million, while protecting their turf from mobile-phone companies — which
have three times as many customers and are bidding to offer money transfers.
‘Weak Demand’
The company will probably achieve loan growth of 2 percent
to 5 percent in 2019 after missing its target last year, Amangbo said. Customer
loans declined by 8 percent in the nine months through September to 2 trillion
naira ($5.5 billion).
“We don’t see a very strong growth in the loan book in
2019,” he said. “Demand is still very weak.”
The lender plans to pay off a $500 million Eurobond maturing
in April and won’t issue a new one due to the limited scope for dollar lending,
Amangbo said. “If the opportunity comes, we will go to the market, but now we
will pay off that.”
Zenith is still trying recover past loans to the oil and gas
sector, the CEO said. The industry accounted for 46 percent of non-performing
loans in the third quarter of last year, and nearly a third of its total loan
book.
“I don’t think there is so much appetite to lend to the oil
and gas space,” he said.
Concerns over a devaluation of the naira are also weighing
on lenders’ desire to finance the industry, whose survival is tied to the
availability of foreign exchange for raw material imports. Deposits are also
not increasing, making funding for lenders expensive in the face of cash reserve
ratios of 22.5 percent.
“It takes some time for the economy to reset,” he said. “As
a bank, you’ll want to be cautious.”
