Given the volatile nature of crude oil, Nigeria’s major revenue earner, which is putting the proposed 2019 budget at risk even before passage, Zenith Bank Plc is shifting its focus more into the consumer lending space.
The bank hopes to expand retail loans as a percentage of total credit to about 4% this year from less than 1% in 2018, according to its Chief Executive Officer, Peter Amangbo, told Bloomberg in an interview at its headquarters.
Zenith Bank hopes to achieve this by making a bigger push into personal loans, car financing and mortgages.
The bank is looking to achieve loan growth of 2% to 5% in 2019 after missing its target last year, Amangbo said.
Customer loans declined by 8% in the nine months through September to N2tr ($5.5bn).
“There is a lot we’re doing on revenue. We expect our retail franchise to grow. Our electronic business, our digital banking is growing,” he added, at a time 30% drop in oil prices since October hinders Nigeria’s main export and foreign-currency earner, damping demand for funding.
Nigerian banks are increasingly tapping into digital technology to reach the 50m unbanked people in a nation of 200m, while protecting their turf from mobile-phone companies — which have three times as many customers and are bidding to offer money transfers.
“We don’t see a very strong growth in the loan book in 2019. Demand is still very weak,” he added.
The lender plans to pay off a $500m 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 to recover past loans to the oil and gas sector, the CEO said. The industry accounted for 46% 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. As a bank, you’ll want to be cautious,” he stressed.