Nigeria's Wema Bank says devaluation would increase bad loan ratio

Wema Bank's non-performing loan (NPL) ratio will rise if the naira is devalued as expected later this year, a senior executive at the mid-tier Nigerian lender said on Monday.
Nigeria has been running short of dollars after its oil revenues fell along with the price of crude. That has driven the naira to a low of 520 to the dollar on the black market, far wea

ker than the official interbank rate of 305.
On Monday, the central bank said it would supply retail customers with dollars at a 20 percent premium to the official rate to try to clear a demand backlog and narrow the spread between the official and black market rates.
"A lot of banks have priced in a possible devaluation in terms of the way they measure risk and collateral requirements," Wema Bank Chief Finance Officer Tunde Mabawonku told Reuters. "There might be a devaluation."
"If there is a 100 naira adjustment in rates to 400 naira, we expect a 50 basis point rise in NPLs to 3.4 percent," he said, adding that Wema did not plan to expand its loan book in 2017 following two years of growth.
Wema's NPLs hit 2.9 percent in 2016, still within the industry limit of 5 percent set by the central bank. Mabawonku said the bank's loan book grew 10 percent in 2016 and 32 percent in 2015.
Shares in Wema have underperformed the broader market both this year and in 2016. They have fallen 7.4 percent since the start of January while the main index .is down 6.4 percent.
Wema shares slumped 46 percent last year as the banking sector in general, and smaller lenders in particular, came under pressure from the naira crisis and economic slowdown. Shares in mid-tier rivals such as Skye Bank and Diamond Bank, for example, lost more than 60 percent.
Several Nigerian lenders have adapted their business models after low crude prices put pressure on the once lucrative oil and gas sector and drove the economy into its first recession in a quarter of a century.
Mabawonku said while retail customers made up 90 percent of its depositors, they only contributed 30 percent of overall deposits. He said the bank was aiming to change that so that by 2020, retail clients contributed 90 percent of its deposits.
He said the bank planned to use digital platforms to attract more deposits, reopen some branches it closed due to capital constraints and add 10 new outlets this year to its network of 149 branches.
The bank's finance chief said Wema planned to tap the bond market later this year to fund expansion.
It had planned to raise 20 billion naira last year but only managed 6.5 billion due to high interest rates so would approach debt markets again in the third quarter, as long as interest rates stayed under 18 percent.
(C) Reuters News