Anxiety over rising banks’ borrowing from CBN


Guaranty Trust Bank Plc. (GTB) has been adjudged as the most profitable bank in Nigeria, garnering a whopping N2.417 trillion customer deposits and N99.13 billion Profit After Tax (PAT) from January to June 2019. The figures show a 6.33 per cent rise in the bank’s customer deposits from the same period in 2018 in which the bank grossed N2.273 trillion deposits and N95.58 billion PAT respectively.

According to findings by BusinessHallmark, GTB generated the highest PAT even though the bank did not have the highest deposit.

This feat was achieved despite a harsh operating environment occasioned by the sluggish economy and increasing competition from Financial Technology (FinTech) companies, as 12 Deposit Money Banks (DMBs) in the country raked in a total of N24.349 trillion as customer deposits in the first half of this year.

The amount is N297.879 billion (1.2 per cent) more than the N24.051 trillion that the lenders garnered as customer deposits in the same period of 2018.The lenders also posted total Profit After Tax (PAT) of N414.14 billion in the first six months of this year as against N375.12 billion for the same period of last year.

Aside GTB, the banks are Zenith Bank Plc., United Bank for Africa Plc. (UBA), FBN Holdings Plc., Fidelity Bank Plc., FCMB Group, Ecobank Transnational Incorporated (ETI), Sterling Bank, Union Bank of Nigeria Plc., Stanbic IBTC, Wema Bank Plc. and Unity Bank.

In fact, analysts expect that when Access Bank, which merged with Diamond Bank in April this year, eventually releases its H1 2019 results, the numbers will show that in terms of deposit mobilization, DMBs also performed better in the first six months of this year compared with the same period in 2018.

Specifically, analysis of the H1 2019 results released by the 12 DMBs indicate that Pan African lender, ETI’s customer deposits increased to N5.83 trillion in the first half of this year compared with N5.80 trillion reported for the comparative period in 2018. The lender’s PAT increased to N59.5 billion from N51.6 billion in the same period of last year.

It was followed by Zenith Bank, which recorded customer deposits of N3.810 trillion in the first half of this year compared with N3.690 trillion it raked in during the same period of 2018. The tier 1 lender posted PAT of N88.88 billion compared with N81.4 billion in corresponding period of 2018.

Also, UBA’s customer deposits went up by 4.47 per cent to N3.681 trillion, in the first half of this year, from N3.523 trillion in the comparative of last year. The bank’s PAT also increased to N56.74 billion from N43.79 billion.

FBN Holdings customer deposits dropped to N3.6 trillion in H1 2019 from N3.9 trillion in the corresponding period of 2018. The Tier 1’s PAT also declined to N31.7 billion from N33.5 billion in the same period of 2018.

Likewise, Stanbic IBTC’s customer deposits fell to N693.548 billion in the first half of this year from N807 billion in the same period of last year. Its PAT was also down to N36.25 billion from N43.084 billion in the period under review.

However, the other six banks’ H1 2019 financial statements show growth in their customer deposits.

For instance, Fidelity Bank’s customer deposits grew by 12.01 per cent to N1.097 trillion from N979.413 billion in the corresponding period of 2018. The Tier 2 lender’s PAT also increased to N13.69 billion from N11.84 billion in the corresponding period of 2018.

Also, Union Bank’s customer deposits increased to N889.471 billion from N826.7 billion in the same period of last year. The bank’s PAT went up to N11.85 billion from N11.46 billion in the first half of 2018.

Equally, FCMB’s deposits edged up to N822.992 billion from N821.747 billion in the comparative period of 2018. The lender’s PAT rose by 31.5 per cent to N7.53 billion from N5.72 billion in corresponding period of last year.

Sterling Bank’s customer deposits also headed north, rising to N819 billion from N761 billion in the same period of last year. The bank’s PAT fell to N5.66 billion from N6.2 billion in the first half of 2018.

Wema Bank and Unity Bank reported customer deposits of N446 billion and N241.9 billion respectively for the period under review. Both lenders also posted higher PAT of N2.25 billion and N967.5 million respectively.

In the last two years, analysts have been predicting that lenders would struggle to mobilise deposits from individuals as bank customers were increasingly shunning banks’ low interest savings accounts for more attractive treasury bills’ yields. There have also been predictions in some quarters that the rapid growth of Fintech companies will result in more competition with banks for retail deposits.

Ambrose Omordion, chief research officer at Investa told this newspaper that “In the days ahead, customers will be having a rethink about banking their money, they will move increasingly away from low interest savings accounts to the more attractive treasury bills’ yields.”

Indeed, in a recent report, Financial Derivatives Company Limited (FDC) cited an example of Piggybank, which uses recurring card payments to allow its customers create and fund a savings account on their mobile phone.

According to the report, the Fintech firm’s product is popular among working class Nigerian youths as it offers an alternative to a traditional fixed deposit account, which usually requires a number of visits to a bank’s physical branch to become operational.

In addition, the imminent take-off of Payment Service Banks (PSBs) in the country is also expected to lead to a decline in banks’ customer deposits given that telecom giants such as MTN and Airtel Nigeria have applied for licenses to establish PSBs.

Guidelines for the operation of PSBs unveiled by the Central Bank of Nigeria (CBN) show that the PSBs are to operate mostly in the rural areas and unbanked locations and would target financially excluded persons.

Industry watchers believe that the telcos, with their large customer base and infrastructure, will fare better than DMBs in attracting customers in the rural areas.

However, many bank executives have argued that DMBs don’t regard Fintech as a threat, but would adopt the companies’ strategies and partner with them, where necessary, to attract more depositors.

For instance, commenting on Fidelity Bank‘s H1 2019 results, the lender’s CEO, Mr. Nnamdi Okonkwo, said that its digital banking has continued to gain traction driven by new initiatives in retail lending segment and increased cross-selling of its digital banking products.

“We now have 45.0 per cent of our customers enrolled in the bank’s mobile/internet banking products, 82.0 per cent of total transactions now done on digital platforms and 29.0 per cent of fee-based income now coming from digital banking,” he stated.

The Fidelity CEO pointed out that retail loans were steadily on the rise after the launch of the bank’s new digital lending product, dubbed Fidelity Fastloan, further adding that the bank has deepened lending partnerships with select FinTech companies.

In a recent report in 2017, Afrinvest Securities Limited had predicted that with the increased focus on the retail segment, the future of banking was set to take a dramatic turn.

“We believe banks will begin to specialise in specific areas of business to ensure they compete effectively in the new banking landscape. While most banks are hinged on product differentiation strategies using innovation to remain afloat, we keep a keen watch on the industry’s competitiveness as events unfold,” the firm stated.

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