The Oasis Reporters
May 13, 2020
Consider the scenario of airline firms buying or leasing wide bodied aircraft in anticipation of flying customers to global destinations with large volume induced profits in mind.
Suddenly the unexpected happened. No one foresaw it and Covid-19 came, changing the way to travel, forever.
Ebenezer Onyeagwu, Zenith Bank Plc CEO/GMD says that one of the most immediate impacts of the Pandemic is the fact that the oil price crash will have negative implications for banks’ revenue targets. He was right on target in his interview with CNBC Africa. After all, if the world is practically on lockdown, planes won’t fly as frequently as they previously would have.
When they don’t fly, they won’t buy Aviation fuel, further corroborating earlier forecasts and reports about how the COVID-19 pandemic is bound to adversely affect the Nigerian banking industry. Many banks have significant exposures in the oil and gas portfolio.
Speaking to CNBC Africa, Onyeagwu stated that one of the most immediate impacts of the Pandemic is the fact that the oil price crash will have negative implications for banks’ revenue targets.
“In terms of banking, the drop in the price of crude is affecting directly, the exposure that banks have created in the oil and gas sector. Revenues are challenged now, no doubt. And you have a situation where revenues are challenged, the obvious next step will be for you to restructure,” Onyeagwu stated.
He also noted that the situation will remain very challenging until there is a vaccine to remedy the virus. For now, efforts are being made to flatten the curve by preventing further spread of the virus. And while this effort continues, banks are not expecting much growth. According to him:
In this moment too, as far as banking is concerned, we are also going to experience the fact that we don’t expect a situation where there will be growth in loan books. Loan growth will be challenged.The World Bank’s screen now is on different sectors of the economy and how the COVID impacts them restructuring the loan book. The Central Bank has even given a dispensation to this effect, asking banks to come up with the various proposals they have for the restructuring of the loan book.”
Ebenezer Onyeagwu spoke further on CNBC Africa’s ‘Beyond Markets’ :
On exposure of banks to Oil and Gas. He says Risk premium increases in this kind of scenario and Zenith Bank has hedges, so there is nothing to worry much about.
But when the curve is flattened, hoping on scientists to come up with a solution, things will improve, for oil will still be in contention. “Risk mitigation and minimization is the focal point at Zenith Bank”.
On the flipside, revelations arose from his insightful interview, disclosing that there have been some positives arising from the COVID-19 pandemic. According to him, Zenith Bank has recently witnessed a massive increase in the number of businesses being transacted through various digital channels. Apparently, customers who were hitherto disinterested in digital banking are now showing interest.
The strategic foresight by Zenith Bank in expanding the frontiers of digital channels in banking, made it a major receptacle of fee based businesses that has accounted for a large chunk of it’s volume, giving Zenith Bank a profit before tax that rose by 3% to N58.7 billion in the first quarter of 2020.
In line with the new normal of financial transactions, even churches collect offerings and tithes through digital channels. And that is online and realtime.