CBN warns banks over loans to OANDO

CBN warns banks over loans to OANDO

Monday, April 4, 2016 7:02 pm

Wale Tinubu, CEO of Oando

Wale Tinubu, CEO of Oando

Nigeria’s Fidelity bank said on Monday it had put a 22.4 billion naira ($113 million) loan to Lagos-listed energy firm Oando Plc on a watchlist and taken a special provision of 5 percent.

The mid-tier commercial lender said on an analysts’ call that the Oando loan accounted for 3.7 percent of its total loan book and 15.2 percent of its energy loan book, head of strategy, Gbolahan Joshua said.

Joshua said the loan to Oando has not been classified as non-performing but that the central bank had advised commercial lenders including Fidelity Bank exposed to the energy firm to make a special provision of 5 percent.

Fidelity said it lent 14.9 billion naira to Oando Marketing and 7.5 billion naira to Oando Energy services Ltd.

“The central bank is taking a prudent view. It has given a deadline for Oando and the banks to come back with a structure … including disposal of assets,” Chief Executive Nnamdi Okonkwo said on the call.

Shares in Oando were down 1.75 percent after Fidelity said it had put the loan on its watchlist.

Oando has agreed to sell its downstream business to oil trading group Vitol and said it would sell its power and gas subsidiaries and raise up to 80 billion naira through a rights issue after reporting a record loss of $1.10 billion for 2014. Oando is still due to post results for 2015, having reported a $246 million loss in the nine months to September.

Oando paid $1.5 billion to acquire ConocoPhillips’ Nigerian assets in 2013, when oil prices were at a peak. But high financing costs coupled with the plunge in oil prices have hit profits, despite an increase in production volumes.

Fidelity said it had taken the Oando charge against profits, making a provision of 1.1 billion naira. Fidelity’s 2015 pretax profit fell 9.6 percent to 14.02 billion naira.

“Once the whole Oando scenario is resolved it becomes a positive for us,” the bank said.

Okonkwo said assuming Oando’s loans were to be classified its non-performing loan ratio would hit 8.1 percent, from 4.4 percent.

Fidelity missed its loan growth target for 2015, which it had originally put at 10 percent, with the actual rise last year 6.7 percent, down from a 27.1 percent growth rate in 2014, Okonkwo said.

It aims to expand lending by between 5 to 7.5 percent this year.


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