Zenith Bank projects a 2.5 percent growth in its loan books this year according to Rueters. The bank plans to increase lending to local manufacturers in the country. This development is in line with the request made by the Central Bank of Nigeria which in July encouraged banks to lend to companies in the manufacturing and agricultural sector in the country.
The apex bank made this request through the CBN communiqué released during the last monetary policy committee meeting which held on July 23rd and 24th . CBN promised to incentivise banks by creating a dynamic reserve requirement that will allow the banks who lend to the employment elastic sectors of the economy at single digit interest rate hold less cash reserves with the monetary authority.
The bank said weak economic growth affected lending last year. However, as the economy improves it expects loans to grow, especially as the central bank introduces liquidity to the banking sector targeting credit to manufacturers.
“For the manufacturing sector, we still see some opportunity there. We believe that there would be an incentive for the manufacturers … and the engagement has started,” it said.
Zenith Bank on Monday released its half year 2018 financial statement which showed a decline of 16.7 percent in its loans and advances book from N2.1 trillion at year end 2017 to N1.87 trillion in H1 2018. The decline in loans wasn’t to move risk assets into the sovereign debt as the banks Treasury bill holdings also declined from N936 billion in at year end 2017 to N923 billion in H1 2018.
Total assets of the bank declined from N5.59 trillion in December 2017 to N5.25 trillion in June 2018. This decline could be attributed to a fall in deposits from N3.4 trillion at year end 2017 to N3.1 trillion in H1 2018 as customer withdrawals exceeded new inflows. As such the Tier one bank may need to complement the loan growth strategy with a deposit mobilization drive for the 2.5 percent loan book growth projection to succeed.
Notwithstanding the drop in assets, the bank managed to increase by 8.5 percent its profit after tax from N75.3 billion in H1 2017 to N81.7 billion in H1 2018.
“The onset of political activities came earlier than expected and economic activity remains fragile at best, making it almost impossible for banks to create credit assets,” said Johnson Chukwu, CEO, Cowry Asset management. Chukwu added that banks are keen to reduce their non-performing loans and the current environment is risk-laden.
Despite the increase in political risk in the country, Zenith Bank is still looking to increase its loan exposure in the real sector of the economy.
The bank is positive going into the second half of the year as it looks for opportunities to deploy credit facilities to vibrant companies in the manufacturing sector. The Purchasing Managers Index (PMI), a key metric for determining the strength of the manufacturing sector expanded for the 16th consecutive month in June. The manufacturing sector grew by 3.3 percent during the first quarter of 2018.
