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Analysts at Cordros Capital has said it expects Zenith Bank to be impacted by further Cash Reserve Ratio (CRR) penalty after the bank’s current loans-to-deposits ratio (55.80 per cent) fell below the new minimum LDR of 65 per cent.
This is even as they added that the bank would require a further expansion of 16.5 per cent to the bank’s loan book to meet the minimum threshold by December 2019.
Zenith Bank had reported a profit after tax of N150.72 billion for nine months period that ended Sept. 30, 2019. The profit represented a growth of five per cent when compared to N144.18 billion achieved in the corresponding period of 2018.
The bank, in the unaudited result released by the Nigerian Stock Exchange (NSE), said that profit before tax stood at N176.18 billion against N167.31 billion in the comparative period of 2018.
Also, the bank’s non-performing loans (NPL) ratio improved to 4.95 per cent from 5.30 per cent in the prior quarter, attributed to the significant quarter on quarter expansion in loans to customers (+13.4 per cent to N2.04 trillion). Similarly, the bank’s capital adequacy (23.80 per cent) and liquidity (63.82 per cent) ratios remained strong to signify that the bank has ample headroom for growth over the medium-term.
However, the bank’s current loans-to-deposits ratio (55.80 per cent) fell below the new minimum LDR of 65 per cent with the analysts at Cordros Capital saying that they do not expect the bank to reach the threshold while adding that the bank will be impacted by further CRR penalty.
They said: “While the bank’s performance was strong and macro-prudential ratios remain above the prescribed guidelines, we envisage that the bank will have issues meeting the new LDR floor set by the Central Bank of Nigeria (CBN).
We are encouraged by the growth we’ve seen through from the end of H1-19, with the substantial loan growth recorded. However, the bank remains well below the threshold which should result in a CRR hit at 2019 financial year as well”.
