In its circular, BSD/DIR/GEN/LAB/12/070, to banks dated January 07, 2020 on the regulatory measures to improve lending to the real sector of the Nigerian economy, the Central Bank of Nigeria (CBN) directed banks to maintain a minimum 65% Loan to Deposit Ratio (LDR) with a further requirement that an average daily 65% LDR compliance be maintained by banks.
Since the issuance of the regulatory directive and in line with its key strategic objective of driving economic growth in Nigeria, Stanbic IBTC Bank (“the Bank”) has increasingly focused on the growth of its credit exposures to the real sector of the economy. The focus and concerted efforts of the Bank’s management to ensure compliance with the regulatory directive of improving lending to the real sector of the Nigerian economy have been responsible for the growth in the risk asset portfolio for Stanbic IBTC Bank over the last two years. The loan book increased by 18% from FY 2019 position of N556.4bn to N655.3bn as at 31 December 2020. The Bank also recorded an increased loan growth by 30% from the 31 December 2020 position to a gross risk asset position of N854.9bn recorded as at 30 September 2021. It is important to note that the risk asset growth of 18% and 30% recorded by the Bank in FY 2020 and as at Q3:2021 remain significantly higher than the industry average growth of 18% and 8% in FY 2020 and as at Q3:2021, respectively.
Consequent upon the significant growth recorded in the Bank’s risk asset growth in 2020 and YTD 2021, the Bank has remained compliant with the CBN’s daily minimum LDR requirement of 65% with a FY 2020 daily LDR average of 65.84% and 2021 YTD daily average of 69.86%. It is important to note that the Bank suffered no CRR debits by the CBN for non-compliance with the regulatory LDR directive over the period.
For good record, it is also noted that the growth in the Bank’s Cash Reserve Requirement (CRR) position from N369.0bn as at 31 December 2020 to N462.6bn as at 30 September 2021 has been largely on account of the monetary policy actions introduced by the CBN to rein in inflationary and exchange rate pressures in the economy. In line with its price stability and monetary policy mandates, the CBN is saddled with the responsibility of managing surplus liquidity in the system and at various times over the period, the CBN has introduced special CRR debits to sterilize surplus market liquidity. These special CRR debits which are over and above the minimum regulatory cash reserving requirement of 27.5% of customer deposit growth have indeed been responsible for the growth in Stanbic IBTC Bank’s total and effective CRR positions which stood at N462.6bn and 60.09% respectively as at 30 September 2021.
Notwithstanding the financial constraints arising from the sterilized liquidity from the CBN, Stanbic IBTC Bank remains very liquid and adequately capitalized with liquidity ratio and capital adequacy ratio standing at 96.2% and 15.7% respectively as at 30 September 2021 and above the regulatory minimum of 30% for liquidity ratio and 8% for capital adequacy ratio.
