Some banks cross hurdle as CBN’s 60% LDR mandate expires today

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6 years ago

CBN Governor, Emefiele

AS deadline for the Central Bank of Nigeria’s (CBN’s) instruction for banks to maintain a loan to deposit ratio (LDR) of 60 per cent by September 30 2019 elapses today, a number of

Deposit Money Banks (DMBs) have managed to increase their loan books to escape the regulator’s hammer.

Although, all the figures for the third quarter is not yet available, an analysis of the audited financial statements of 13 DMBs listed on the Nigerian Stock Exchange showed that seven of them had a loan-to-deposit ratio of over 60 per cent as of June 2019.

In addition to this, most lenders deliberately designed products aimed at increasing their loan books. For instance, in a bid to provide support for Medium and Small-Scale businesses (MSMEs) in Nigeria, Sterling Bank in the middle of September set aside a sum of N50 billion in loans to fund a pool of businesses in need of financial assistance.

However, while bank loans to customers have improved significantly, not all banks have met the Central Bank’s loan-to-deposit ratio. Basically, deposit money banks, whose loan-to-deposit ratios are below the new target, intensified effort to get more borrowers before the deadline.

Banks allocate N15.13trn credit to private sector ― NBS

Reports show that loans and advances to customers of the thirteen (13) Nigerian banks listed on the Nigerian Stock Exchange (NSE) rose to N17.7 trillion as of June 2019, from N16.15 trillion in December 2018. This suggests the 13 listed banks increased total loans and advances by N1.5 trillion between January and June 2019.

A closer look into the banks’ financials shows that while total loans and advances hit N17.7 trillion, banks’ deposits as of June 2019 stood at N28.3 trillion. This implies the 13 listed banks all together have a 62 per cent loan-to-deposit ratio.

However, the Monetary Policy Committee (MPC) noted the increased supply of micro credit to key Micro Small and Medium Enterprises (MSMEs) and effort through the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank to extend the reach of its credit facilities across the country, but, however, observed that the growth in credit to the private sector remained significantly low, relative to the absorptive capacity of the economy.

A further breakdown showed that FBN Holdings Plc expanded its loan book by N59.42billion in the first half of the year as loans and advances to customers rose to N1.74trillion as of June 2019. With customer deposits of N3.58trillion, the bank’s loan-to-deposit ratio stood at 48.6 per cent.

Guaranty Trust Bank Plc increased credit to customers by N13.85billion to N1.27trillion June. With customer deposits of N2.42billion LDR stood at 52.5 per cent.

Stanbic IBTC Holdings Plc’s lending increased by N22.36billion to N455.08 billion with customer deposits of N693.55 billion, its LDR stood at 66.61 per cent.

Fidelity Bank Plc grew its loan book by N149.43 billion to N999.32 billion as of June, while its customer deposits rose at N1.09 trillion from N979.42 billion in December 2018. Its LDR stood at 91.68 per cent.

Sterling Bank Plc’s loans and advances rose by N702 million to N621.72 billion. With customer deposits of N818.6 billion, it recorded an LDR of 75.94 per cent.

Union Bank of Nigeria Plc saw its loan book expand by N43.3 billion to N563 billion as of June. With customer deposits of N889.5 billion, its LDR stood at 63.29 per cent.

Unity Bank Plc increased its loans and advances to customers by N26.96 billion to N70.62 billion while its customer deposits rose slightly by 0.1 per cent to N242.22 billion. Its LDR stood at 29.16 per cent as of June.

Wema Bank Plc’s credit to customers rose by N28.77 billion to N280.96 billion. With customer deposits of N446.09 billion, its LDR stood at 62.98 per cent.

Before its merger with Diamond Bank, the lender expanded its loan book by N607 billion in the first three months of the year to N2.6 trillion. With customer deposits of N3.92 trillion, it recorded an LDR of 66.33 per cent as of March. Diamond Bank had an LDR of 54.4 per cent as its customer deposits and loans to customers stood at N1.04 trillion and N567.9 billion respectively.

Zenith Bank Plc reduced its loan book by N21.28 billion to N1.80 trillion, while deposits from customers grew to N3.81 trillion in June from N3.69 trillion in December 2018. Its LDR stood at 47.24 per cent.

United Bank for Africa Plc also cut its lending to customers by N27.78 billion to N1.69 trillion as of June. With customer deposits of N3.51 trillion, its LDR stood at 48.15 per cent.

FCMB Group Plc’s loans and advances dropped to N617.91 billion in June 2019 from N633.03 billion in December 2018. It recorded an LDR of 75.08 per cent as it had N822.99 billion deposits at the end of the first half of 2019.

Ecobank Transnational Incorporated, the parent company of Ecobank Nigeria, reduced its loans and advances by N188 billion to N3.15 trillion. With customer deposits of N5.83 trillion, its LDR stood at 54.03 per cent.