Zenith Bank: There is nothing like NPL under IFRS-9, says CFO

Dr. Mukhtar Adam, the Chief Financial Officer (CFO) at Zenith International Bank Plc said there is nothing like non-performing loan ratio (NPL) under the International Financial Reporting Standards-9.

Adam said this at earnings conference with analysts while reacting to questions that unlike some of its peers, Zenith bank still report NPLs on a prudential basis as against under IFRS calculation.

IFRS introduces expected credit losses model that requires banks to write off the portion of the gross carrying amount of financial assets for which it has no reasonable expectation of recovery.

Meanwhile, some of the bank’s peers in the banking sector that have also adopted the standard have been calculating their NPL ratio in line with IFRS-9.

Analyst asked that on an IFRS 9 basis, Zenith’s NPLs appear to be higher than the 4.3% that was reported.

“When do you think you would start reports in this on an IFRS 9 basis”, analyst queried.

In his reaction, Zenith’s CFO said: “I don’t think there’s anything under IFRS 9 that is called NPL.

“You’ll never find it in any IFRS book, and there’s nowhere you’ll find it.

“So when are we going to start reporting like that? There’s no need for us to do that”, he reiterated.

Adam said the most important thing for you to ask is, have we reported all our stage 3 loans in our financial statements?

“Yes, the stage 3 loan that is driven by IFRS 9 principle is properly disclosed in our financial statements”, he said.

Adam then asked: what is called NPL? That is based on the prudential guidelines issued by Central Bank.

He said CBN continues to give guidelines on what to call NPL.

“We have also disclosed that in the financial statements. So I think it is transparent enough.

“You have the 2. So as an analyst, you can work with any of the 2, depending on what you want to analyze”, he pointed.

The CFO said: “Our responsibility is to disclose everything to our readers, our shareholders, which we have done on the financial statements.

“The rules guiding IFRS is totally different from the prudential guideline. So, there is nothing that has come to say, let us harmonize them.

“Until you do that, you are using different principles and different rules, and it gives a very wrong message. So in our financial statements, we have our stage 3 loans, and we have our NPL”, the CFO said.

Zenith Bank: There is nothing like NPL under IFRS-9, says CFO