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Zenith Bank targets market share in retail banking over oil risks

Zenith Bank


Zenith Bank Plc, Nigeria’s biggest lender by assets, is paying more attention to retail lending as crude oil prices continue to plummet in the international market, threatening Nigeria’s oil-dependent economy as well as the lender’s business customers.

The tier-one bank is likely to increase the percentage of its retail loans to total credit, which stood at less than 1 percent in 2018, to about 4 percent in 2019, according to Bloomberg.

“There is a lot of market in that segment,” said Gbolahan Ologunro, equity research analyst at Lagos-based CSL Stockbrokers. “In the retail segment you can look at the unbanked and under-banked.”

The lender’s strategy to expand its lending to the customers is coming after a proposed merger and acquisition deal between Access and Diamond Bank, making five largest banks to take 60 percent market share by assets and putting mid-tier financial institutions on toes for market niche to remain competitive in the banking industry.

“The industry is becoming more competitive and everyone has to understand what they are doing and find a better way,” said Ayodele Akinwunmi, head of research, FSDH Merchant Bank. “The big ones are encroaching into the smaller ones.”

Zenith Bank’s CEO, Peter Amangbo, in an interview at the bank’s headquarters in Lagos said the strategy will be achieved through increased lending into personal loans, mortgages and car financing.

“Everybody is realigning their strategies and operations to ensure that they change with the time,” said Akinwunmi.

“There is a lot we’re doing on revenue,” Amangbo said. “We expect our retail franchise to grow. Our electronic business, our digital banking is growing.”

The shift became imperative for Zenith Bank as Brent Crude against which Nigeria’s oil is priced has dropped about 30 percent from a peak of over $86 per barrel in early October to about $60 per barrel in late January, affecting demand for credit from Zenith.

Crude oil is Nigeria’s major source of revenue and accounts for more than 95 percent of the nation’s foreign exchange earnings.

With an estimate of over 50 million Nigerians – about 25 percent of the nation’s population – shut out of the banking industry, Nigerian banks are aiming to reach out to more unbanked people by penetrating into the digital technology space, which is becoming more competitive especially with the introduction Payment Service Banks (PSBs) by the Central Bank of Nigeria (CBN) to deepen financial inclusion.

This, however, poses a threat to the banks as telecoms firms – which have three-times more customers – can now facilitate transactions in remittance services, micro savings and withdrawal services in rural areas upon presentation of an initial capital of N5 billion to get PSBs licences.


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