Martins Adegoke was surprised when his bank sent him an email offering a loan product.
“They even had an official come to my office to convince me to take the loan,” Adegoke, a 40 year-old branch manager of a Fast Moving Consumer Goods company, told BusinessDay. “That’s new, but some of friends say they got similar offers from their banks.”
Nigerian banks are beginning to rediscover retail customers after a bruising recession which led to a spike in loan defaults made them risk-averse.
The biggest lenders plan to increase their focus on retail lending, from personal loans to car financing and mortgage, this year in efforts to grow their loan books.
Segun Agbaje, chief executive officer, Guaranty Trust Bank (GTB), said the tier-one lender will make a big push to grow its retail loan book this year and reduce the dominance in upstream oil and gas institutional lending.
“Our retail customer base went up from 11.9 million in 2017 to 14 million in 2018 and we will to continue to grow our retail loan book in an orderly manner without picking up Non-Performing Loans,” Agbaje said in a call with analysts and investors.
According to Agbaje, GTB will push more consumer products into the market to attain the retail lending growth.
Fintech companies, from Renmoney to Paylater, are already making significant inroads into retail lending and it appears the banks are now latching on to the perceived opportunities in that segment.
Peter Amangbo, Zenith Bank’s CEO, also said in an earlier interview that the country’s biggest bank by assets plans to expand retail loans as a percentage of total credit to about 4 percent this year, from less than 1 percent in 2018.
The renewed focus on consumer lending is a sign that the banks see a recovery in consumer spending in 2019 and are positioning to take advantage of that recovery.
Consumers are expected to loosen their purse strings to some extent this year as inflation slows and the economy continues to recover.
The banks are making the shift to retail lending following a lull in lending over the past three years as non-performing loans picked up in the aftermath of a sharp drop in oil prices that made it difficult for borrowers to service their loans, forcing banks to write off a huge chunk of credit extended to the oil and gas sector, to which most lenders were heavily exposed.
Banks NPLs have, however, turned the corner since then, falling to within single digits after soaring to over 20 percent in 2016.
The loan improvement, which has been buoyed by higher oil prices and stability in oil production, hasn’t necessarily translated to loan growth with the banks happier to continue reducing NPLs and park cash in risk-free government securities with double-digit yields.
The loan books of two of the big five banks, GTB and Zenith Bank, shrank in 2018 despite initial guidance for 10 percent loan growth as lenders shied away from extending credit in an economy still recovering from a contraction in 2016.
GTB, the biggest bank by market capitalisation, cut loans and advances to customers by 13 percent to N1.26 trillion in 2018 from N1.45 trillion in 2017. Zenith Bank, the biggest lender by assets, also cut credit growth by 13 percent to N1.8 trillion from N2.1 trillion in the period under review. This year, GTB is targeting a 5 percent loan growth while Zenith targets 7.5 percent loan growth, having missed last year’s target.
Agbaje said the motivation to grow GTB’s loan books is not due to falling yields on government securities which have slipped some 200 basis points this year.
“I don’t see a significant decline in yields at least in the first half of the year, if the Central bank continues to tighten monetary policy,” Agbaje said.
The CBN cut benchmark interest rates for the first time in three years at the Monetary Policy Committee (MPC) meeting in March.
The key rate was brought down to 13.5 percent from 14 percent in what lenders say is more of a signalling effect than a sign the CBN is cutting back on aggressive monetary tightening. The bankers say the rate cut is insignificant and does little favours for lending.
Instructively, the CBN governor said the CBN will continue its normal practice in the market despite the rate reduction, a statement interpreted by the banks to mean a continued commitment to maintaining exchange rate stability by mopping excessive naira liquidity.
LOLADE AKINMURELE
