Banks in scramble for borrowers amid looming sanctions

The recent directive issued by the Central Bank of Nigeria to deposit money banks on lending to the real sector of the economy has triggered a scramble for borrowers, ’FEMI ASU writes

Deposit money banks, whose loan-to-deposit ratios are below the new target stipulated by the Central Bank of Nigeria, are intensifying efforts to lure more borrowers before the September 30 deadline.

The CBN, in a circular dated July 3, 2019, mandated all deposit money banks to maintain a minimum loan-to-deposit ratio of 60 per cent by September 30, 2019 in a bid to improve lending to the real sector of the nation’s economy.

It said failure to meet the minimum LDR would result in a levy of additional cash reserve requirement equal to 50 per cent of the lending shortfall of the target LDR.

The CRR is the share of a bank’s total customer deposit that must be be kept with the CBN in the form of liquid cash. It is currently at 22.5 per cent.

“All the banks are working towards full compliance of the CBN pronouncement,” the Chief Executive Officer, First Bank of Nigeria Limited, Dr Adesola Adeduntan, said on Tuesday on the sidelines of a press briefing ahead of the Chartered Institute of Bankers of Nigeria’s forthcoming conference.

An analysis of the audited financial statements of the 13 DMBs listed on the Nigerian Stock Exchange showed that nine of them boosted their loan books in the first half of the year but only seven had a loan-to-deposit ratio of over 60 per cent as of June 2019.

FBN Holdings Plc expanded its loan book by N59.42bn in the first half of the year as loans and advances to customers rose to N1.74tn as of June 2019.

With customer deposits of N3.58tn, the bank’s loan-to-deposit ratio stood at 48.6 per cent.

Guaranty Trust Bank Plc increased its credit to customers by N13.85bn to N1.27tn as of June. With customer deposits of N2.42bn, its LDR stood at 52.5 per cent.

Unity Bank Plc increased its loans and advances to customers by N26.96bn to N70.62bn while its customer deposits rose slightly by 0.1 per cent to N242.22bn. Its LDR stood at 29.16 per cent as of June.Zenith Bank Plc reduced its loan book by N21.28bn to N1.80tn, while deposits from customers grew to N3.81tn in June from N3.69tn in December 2018. Its LDR stood at 47.24 per cent.United Bank for Africa Plc also cut its lending to […]

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