Again, Zenith, Access, GTBank, UBA, FBN Ranked among 1,000 Global Banks

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Moody’s: Banks face competition with CBN’s plan to accelerate fintechs

Obinna Chima and Hamid Ayodeji

Zenith Bank Plc, Access Bank Plc, Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA) and First Bank Nigeria Limited are among the 25 banks in Africa that were ranked among the 2019 Top 1000 global banks by The Banker Magazine.

This is coming as Moody’s Investor Services, one of the global rating agencies, yesterday stated that the plan by the Central Bank of Nigeria (CBN) to deepen the role of financial technology firms (fintechs) in the banking system will result in increased competition against the commercial banks.

CBN’s governor, Godwin Emefiele, had said he planned to initiate a recapitalisation programme to position Nigerian banks among the top 500 in the world.

But the latest ranking by The Banker Magazine unveiled yesterday, Zenith, which ranked number one in Nigeria, ninth in Africa and 424th position in the world has tier 1 capital ranking of $2.672 billion. It was closely followed by Access Bank as second position in Nigeria, 14th in Africa and 581in the world, with a tier one capital of $1.620 billion.

GTBank was ranked third Nigeria, 17th in Africa and 582 in the world, with a tier 1 capital of $1.531billion and UBA occupied the fourth position in Nigeria, 20th in Africa and 704 in the world with a tier1 capital of $1.126 billion.

According to the Banker Magazine, First Bank of Nigeria is the fifth largest bank in Nigeria, with a tier 1 capital of $745 million, 24th position in Africa and 852 position in the world.

China has the world’s largest banks but America’s are much more efficient, according to The Banker’s latest ranking of the Top 1000 World Banks. But if US President Donald Trump is successful in opening up China’s markets the situation could go into reverse, The Banker’s editor Brian Caplen said.

Meanwhile, the plan by the CBN to deepen the role of financial technology firms (fintechs) in the banking system will result in increased competition for commercial banks, Moody’s Investor Services, one of the global rating agencies stated yesterday.

However, it anticipated that the big banks – Access Bank, Zenith Bank, First Bank of Nigeria, United Bank for Africa Plc and Guaranty Trust Bank
Plc – would to be better positioned
to defend their market shares due to their, “larger customer bases and large technology budgets,” according to banking analyst
at Moody’s, Peter Mushangwe.

Emefiele, had while unfolding his five-year policy agenda last week, said the CBN would implement measures to boost the utilisation of unstructured supplementary services data (USSD), mobile banking, agency banking and payment service banks (PSBs) over the next five years.

To this end, Moody’s in a report noted that the plan would deepen the role of fintechs in Nigeria’s banking system, “a credit negative for incumbent banks because it will increase competition. Increased competition will likely outweigh benefits from growing financial inclusion that come from financial innovation.”

“Likewise, Nigeria’s large banks can withstand temporary profitability erosion as they pursue client acquisition and retention. Small and midsize banks will likely face stiffer competition from fintechs given their higher exposures to SMEs. Nigeria’s fintech market is fast-growing, largely dominated by payment service companies such as Interswitch Limited, e-Tranzact, Emerging Market Payments and Unified Payments; consumer payment apps and digital commerce platforms such as Quickteller, KudiMoney, Jumia and KongaPay; and online microlenders. In October 2018, the CBN issued guidelines for the introduction of PSBs.

“A Payment Service Bank (PSB) licence allows non-bank institutions such as telecoms, retail chains and bank agents to offer basic deposit and payment services to their customers.

“PSBs will challenge incumbent banks because of their ability to develop their own digital platforms, hold deposits and make transfers without partnering with banks. These new entrants will compete with banks, especially on retail banking products, which will negatively pressure banks’ consumer business unit margins.

“Large telecom companies will be able to leverage their large customer bases, threatening banks’ strategies to mobilise retail deposits via mobile-phone-based platforms, although banks will be able keep deposits where wallets are held in their trust accounts,” it added.

Nigerian banks have increased fee and commission income from their electronic platforms. In 2018, income from e-banking channels increased by an average 46 per cent and the contribution to total fee and commission income increased to 25 per cent, from 20 per cent in 2017. The contribution of electronic fee income to total fee and commission income also increased in 2018.

“However, an expanding fintech market will encourage innovation and would modernise Nigeria’s financial markets, providing cheaper access to financial services and boosting financial inclusion.

“In the next 12-24 months, we expect more fintechs to partner with banks because the fintechs lack scale. Nigerian fintechs would also need to upgrade their know-your-customer and data protection infrastructure, which will require substantial investments. By comparison, incumbent banks have the resources to invest and the experience to manage these risks.

“Some banks are also likely to buy services from fintechs to improve their operations and services. For example, some Nigerian banks are acquiring robotics services from fintechs and automating repetitive processes, fostering partnerships,” it added.