It is no longer news that the Central Bank of Nigeria (CBN) in an effort to stimulate the economy by improving access to credit for the Real Sector recently mandated all Deposit Money Banks (DMBs) in the country to maintain minimum Loan to Deposit Ratio (LDR) of 60% by September 30 2019. The LDR threshold was later reviewed to 65% with a new deadline of December 31 2019.
To make the policy effective, CBN further prescribed a penalty of additional 50% Cash Reserve Ratio (CRR) of the shortfall in lending for DMBs that were not able to attain the mandated LDR by the set deadline date.
The CBN circular announcing the LDR policy directive was released in the first week of July 2019. And figures from 12 banks’ Q3 2019 reports shows banks aggression towards increase in Customer Loans and Advances as it increased by 1 trillion between July and September 2019 compared to the N580 billion increased in the same 3 months between April and June 2019.
The Biggest 5 Banks: Zenith, UBA, Access, GTB and First Bank increased their Customer Loans with the highest figures with Zenith and UBA growing their Loan balance by N240 billion each while Access, GTB and FirstBank grew their Loans by N120 billion, N110 billion and N80 billion respectively.
Of the 7 Tier 2 banks in the list Fidelity and Stanbic grew their Loan balances by N80 billion each while FCMB, Sterling and Unity Bank increased their Loan balances by N20 billion.
Wema bank increased its Loan balance by N10 billion while Union Bank’s Loan figures remain flat at N530 billion between Q2 and Q3 2019.
For Deposit from Customers, Banks apparently responded to the LDR directive by mobilizing less Deposits after the CBN pronouncement as deposit growth between Q2 and Q3 2019 was seen to be less that Deposit growth between Q1 and Q2 2019. Q3 2019 deposit increased by N240 billion compared to the increase of N740 billion in Q2 2019.
Of the 5 biggest banks, Zenith had the biggest Customer Deposit Q3 growth of N140 billion, FBN and Access Bank grew their Q3 Deposit by N90 billion and N60 billion respectively while GTB and UBA sheds N30 billion and N140 billion in Customer Deposit respectively.
For Tier 2 Bank, Fidelity and Sterling bank increased their Customer Deposit by N30 billion while FCMB grew Deposit by N40 billion. Wema and Unity Bank grew by N10 billion each while Stanbic IBTC and Union Bank remain flat at N690 billion and N890 billion respectively for Q3 2019.
All the 12 banks increased their LDR as at end of quarter 3 which was the initial deadline set by the CBN for DMB to achieve 60% LDR. with the exception of FCMB, Sterling and Wema Bank.
Only FirstBank, GTBank, UBA and Zenith Bank with Unity Bank were not able to meet up with the CBN initial deadline of 30 September 2019 for 60% LDR and were among the 12 banks so sanctioned for LDR infraction. First City Monument Bank was also sanctioned as a bank but the figures contained in this report is for FCMB Group as a holding company.