Zenith Bank Makes 50% Provision on 9mobile Loan

August 9, 2018
Zenith Bank profit

By Dipo Olowookere

A 50 percent provision has been made available by Zenith Bank Plc on its exposure to the loan obtained by telecoms giant, 9mobile, formerly known as Etisalat Nigeria.

Zenith Bank was among the consortium of 13 Nigerian banks, which granted a $1.2 billion credit facility to the company in 2013 to enable it expand its operations in the country.

However, due to the economic downturn of 2015-2016 and Naira devaluation caused by the recession Nigeria fell into, which negatively impacted on the dollar-denominated component of the loan, Etisalat struggled to repay the loan.

Zenith Bank had the highest exposure to 9mobile, amounting to $262 million and N80 billion, followed by GTBank with exposure of $138 million and N42 billion, and Access Bank with exposure of $131 million and N40 billion.

Other lenders involved in the loan deal were First Bank, UBA, Fidelity Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank amongst three others.

An attempt was earlier made by the financial institutions to take over the company, but the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) stopped it.

Instead, it appointed an interim board for 9mobile, appointing Barclays Africa to source for a new investor for the firm.

Earlier this year, Teleology Holdings Limited was picked as the preferred bidder for the 9mobile sale, but the process is yet to be completed.

Zenith Bank’s Chief Financial Officer (CFO), Mr Mukhtar Adam, speaking during an analysts’ call this week, disclosed that the lender has increased its impairment charge on the 9mobile loan to 50 percent.

“We have taken impairment charge on EMTS (Emerging Markets Telecommunication Services Ltd, formerly trading as Etisalat Nigeria) up to 50 percent,” Mr Adam said during the conference, which was monitored by Business Post.

On Monday, Zenith Bank Plc announced the financial statements of the financial institution for the period ended June 30, 2018.

In the firm’s earnings briefly analysed by Business Post, the lender recorded a drop in its turnover for the period under review; N322.2 billion versus N380.4 billion in the same period of last year, representing about 15.3 percent decline.

However, the bank’s profit before tax appreciated by 16.5 percent to N107.4 billion compared with the N92.2 billion reported in the first half of 2017.

Also, the profit after tax of the company went up by 8.5 percent to N81.7 billion from N75.3 billion in H1 2017.

In the financial statements, Zenith Bank posted a non-performing loan (NPL) ratio of 4.9 percent against 4.7 percent as at December 31, 2017.

An analysis by Business Post showed that the financial institution has 54.2 percent exposure to the oil and gas sector, which manufacturing taking 15.1 percent, and power 15.8 percent.

However, the lender has 2.7 percent ($67 million and N23.1 billion) exposure to the telecoms sector, which 9mobile belongs to.

At the close of business on Thursday at the Nigerian Stock Exchange (NSE), Zenith Bank shares lost 15 kobo or 0.63 percent to settle at N23.60k per share.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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