October 22, 2021
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In a low-yield environment, 10 banks spend 433 billion naira on accounts receivable and borrowing servicing

By on October 5, 2021 0

Darasimi Adebisi

In a low-yielding environment, Ecobank Transactional Incorporated (ETI), Access Bank Plc, eight other banks spent 432.96 billion naira to service accounts and customer loans in the first half (H1) of 2021.

This represents a decrease of 10.5% from the 483.73 billion naira recorded in the previous semester of 2020.

A breakdown of the banks’ results revealed that they incurred N286.5 billion in interest charges on customer deposits in the first half of 2021 compared to N359.86 billion in the first half of 2020.

In addition, interest paid by banks on loans closed the first half of 2021 at 146.5 billion naira compared to 123.87 billion naira in the first half of 2020.

The other banks are Guaranty Trust Holding Limited Plc (GTCO), United Bank for Africa Plc (UBA), FBN Holdings Plc, Zenith Bank Plc, Fidelity Bank Plc, Stanbic IBTC Holdings Plc, Union Bank of Nigeria Plc and FCMB Group Plc.

In the same vein, the total expenses incurred by these 10 banks also fell by 10.7% to N542.76 billion in the first half of 2021 against N607.6 billion recorded in the first half of 2020.

The low-yielding environment was reflected in these banks’ spending on customer deposits, as almost all of them saw a decline except for the ETI which gained 2.5% to $ 57.71 billion. naira in the first half of 2021 against 56.32 billion naira in the first half of 2020.

At the meeting of the Monetary Policy Committee (MPC) on September 22, 2020, the umbrella bank voted to reduce the monetary policy rate (TPM) by 100 basis points, from 12.5 to 11.5%.

An analyst at PAC Holdings, Mr. Wole Adeyeye told THISDAY that the cost of funding in the first half of 2021 has fallen, which has led banks to record lower interest charges on customer deposits.

According to him: “When the Central Bank of Nigeria (CBN) lowered the MPR from 12.5% ​​to 11.5%, the cost of funds actually fell, causing interest charges on the deposits of registered customers. these banks during the reporting period. “

Access Bank Plc, for example, reported an 11.05% drop in its interest expense on customer deposits to N 56.77 billion in the first half of 2021, from N63.83 billion in the first half of 2020. , while GTCO also recorded a 24.4% drop in interest expense on customer deposits. to N16.8 billion in the first half of 2021 against N22.24 billion recorded in the first half of 2020.

Further analysis of the banks’ results revealed that UBA recorded a 20.5% decrease in interest charges on customer deposits to 42.4 billion naira in the first half of 2021, while charges for FBN Holdings’ interest on customer deposits fell to N30.8 billion, down 41.5% from N52.72 billion recorded in the first half of 2020.

Zenith Bank recorded 38.5% interest expense on customer deposits at 26.16 billion naira in the first half of 2021 compared to 42.5 billion naira recorded in the first half of 2020.

In addition, Fidelity Bank’s interest expense on customer deposits fell from N26.27 billion in the first half of 2020 to N24.35 billion in the first half of 2021, while Stanbic IBTC Holdings recorded a decline. around 49% of interest charges on customer deposits at 5.86 naira in the first half of the year. 2021 from 11.48 billion naira in the first half of 2020.

The Union Bank of Nigeria for the period recorded a 16.09% drop in interest charges to 12.46 billion naira in the first half of 2021, compared to 14.8 billion naira recorded in the first half of 2020 under the name of FCMB Group Plc. Interest charges recorded on customer deposits of 13.08 billion naira in the first half of 2021 compared to 16.24 billion naira recorded in the first half of 2020.

Also commenting, analyst Rotimi Fakayejo explained TO DAY that the weak growth in client deposits during the period was responsible for the result.

He explained that: “The banking sector in the first half of 2021 experienced low customer deposits despite the CBN directive on a 65% loan-to-deposit ratio policy.

“Essentially, there was no aggressive deposit in the banking industry because the banks were being cautious. Small deposit banks cannot run out of lending, which has definitely brought rates down and lower interest charges.


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