Nigeria's Zenith Bank Eyes Shift to Retail Loans on Oil Risk

Zenith Bank plans to repay its outstanding $500 million Eurobond expected to mature in April, the lender’s chief executive officer has said.
Peter Amangbo told Bloomberg in an interview that the bank does not intend to issue fresh Eurobond going forward due to the limited scope for dollar lending.
“If the opportunity comes, we will go to the market, but now we will pay off that. (Eurobond)”
The Bank had raise $500 million via Eurobond in June 2017 to be used for its general banking purposes. Insiders said the bulk of the fund was disbursed to help oil and gas sector develop capacity.
Zenith is still trying to recover past loans to the oil and gas sector, the CEO said. The industry accounted for 46 percent 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.
He also said the bank, which is the second biggest lender in Africa’s biggest economy would increase its focus on consumer lending as lower oil prices weigh on the economy, hurting its business customers.
Zenith Bank would expand its retail loans as a percentage of total credit to about four percent this year from less than one percent in 2018.
“There is a lot we’re doing on revenue,” Amangbo said. “We expect our retail franchise to grow. Our electronic business, our digital banking is growing.”
Zenith is making the shift as a 30 percent drop in oil prices since October hinders the nation’s main export and foreign-currency earner, damping demand for funding. Nigerian banks are increasingly tapping into digital technology to reach the 50 million unbanked people in a nation of 200 million while protecting their turf from mobile-phone companies -- which have three times as many customers and are bidding to offer money transfers.
The company will probably achieve loan growth of 2 percent to 5 percent in 2019 after missing its target last year, Amangbo said. Customer loans declined by 8 percent in the nine months through September to 2 trillion naira ($5.5 billion).
“We don’t see a very strong growth in the loan book in 2019,” he said. “Demand is still very weak.”