LDR: We will not be stampede to book loans – Zenith’s CEO

Banks, while following through with the Central Bank of Nigeria’s loan to deposit ratio target, have also indicate they are guided by their risk appetite.

The big balance sheet lenders seems not to be disturbed about possible increase in cash reserve ratio should they fail to meet the loan to deposit ratio benchmark.

Speaking at earnings conference with analysts, the group managing director and chief executive officer at Zenith Bank Plc, Ebenezer Onyeagwu reiterates this position.

Soji Solanke, Head of Research at Renaissance Capital had asked how Zenith was able to ramp up credits in the fourth quarter despite weak macroeconomic situation.

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Solanke asked if Zenith Bank had given credits to customers that the bank would not have lent to.

In response, the GMD said we’ve continued to emphasize the fact that this LDR is not a call for recklessness.

“Zenith Bank will never be reckless when it comes to loan”, Onyeagwu said.

Speaking further, Zenith Bank Chief said: “We’ll continue to do loans that are disciplined, loans where we can see ourselves in and out.

“We will not be stampeded to book loan because there’s a regulation that will hit us by assumption of having our liquidity being constrained or impaired. No”.

Onyeagwu said: “Our ideology for loan remains choosing and picking”.

The bank chief reiterates that management will not destroy value because of LDR. Onyeagwu said the management will continue to work to sustain value.

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“So whatever the loan book, the quality remains a central focus for us. We will not, in any way, compromise it.

“Tenure of the loan, they vary, it depends. It depends on what transaction we funded.

“If it’s a loan coming through the CBN discounted credit reserve lending window, you are going to find longer-term loans that stretch as far as 5 years, 7 years, 8 years, as the case may be”, he responded.

Though, it loan book expanded by more than N400 billion as loan to deposits ratio settled at 68.7% for banks and 57.7% for the group.

For financial year 2020, Zenith bank is guiding for 2% loan growth, just as it seeks to expand deposit in the same line.

In 2019, the bank loan growth was 22% compare with 15% increase in deposits mobilisation.

Zenith Bank said in the regular working capital facility, you are going to find short-tenured facility of less than 1 year.

“Of course, not forgetting the fact that most corporates and also indigenous customer have their regular working capital facilities.

On open market operation (OMO), CBN did not shut down the window and save permanently.

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“We are not aware of the regulation that CBN says you can’t approach OMO market. We haven’t heard about that.

“After all, we still have OMO bills in the market.

“So we believe volume may not be as much as what we want to be, but we don’t think there is any closure for banks in assessing the OMO market”, Onyeagwu said.

We also closed the year with a loan-to-deposit ratio of 68.7% for the bank and 57.7% for the group

LDR: We will not be stampede to book loans – Zenith’s CEO

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