Business
NIGERIAN banks, FBN Holdings Plc, United Bank for Africa Plc and Zenith Bank Plc, will each need to expand their loan books by the equivalent of about $1 billion at $363/$ exchange rate.
This is in order to avoid heavy penalties the central bank is looking to implement, according to S&P Global Market Intelligence calculations.
In a report, ‘Nigerian banks brace for new rules on lending, capital,” published on Standard and Poor’s (S&P) website, the ratings agency observed that following an oil price slump in 2014 and the ensuing recession as well as currency crisis, the country’s banks have been wary of extending loans to the real economy, preferring to tie their money up in safer treasury bonds.
To deter this practice and ramp up growth, the central bank said July 3 that banks would need to maintain a loan-to-deposit ratio of 60 per cent by the end of September, and that those failing to do so would face “a levy of additional cash reserve requirement equal to 50 per cent of the lending shortfall of the target [ratio].”
According to S&P FBN, United Bank for Africa and Zenith Bank all had a loan-to-deposit ratio lower than 60 per cent in the first quarter of 2019, stressing that fellow Nigerian lenders including: Union Bank of Nigeria Plc, Guaranty Trust Bank Plc, Jaiz Bank Plc and Unity Bank Plc are also affected.
The agency further noted that FBN’s ratio stood at 47.59 per cent, United Bank for Africa’s at 47.85 per cent and Zenith’s at 50.18 per cent.
FBN would need to extend an additional N436.16 billion in loans to meet the target, or about $1.20 billion, S&P Global Market Intelligence research shows. United Bank for Africa would need to lend N428.87 billion and Zenith Bank N350.55 billion. The others according to S&P would need to lend between N20.99 billion and N164.78 billion each.
The agency further observed that the CBN Governor, Godwin Emefiele, has also said banks’ minimum capital bases are now insufficient because of the sustained slump in the value of the naira.
Banks have tended to overly concentrate their liquid assets in money markets and treasuries, so the central bank is trying to force banks to lend more to the real economy in order to accelerate growth.
Sunonline
_AUG 27, 2019 @08:40 GMT |
Tags: Nigerian banks need $1bn loan increase to meet new rules –S & P
