FBN Holdings, Fidelity Bank, Others’ Interest Income on T.Bills, Bonds Shrink 12% on Low-interest Yield Environment

Darasimi Adebisi
Following the low-interest yield environment, Zenith Bank Plc, Fidelity Bank Plc and five other banks have reported 12 per cent drop in interest income from Treasury bills (T-Bills) and government bonds in the first half (H1) of 2021.

The other banks are: FBN Holdings Plc, Access bank Plc, United Bank of Africa Plc, Zenith Bank Plc and Guaranty Trust Holdings Plc (formerly Guaranty Trust Bank) and Union Bank of Nigeria Plc.

THISDAY can report that the above seven banks reported a sum of N305.15billion interest income from investing in T-Bills and government bonds in H1 2021 as against N346.5billion in H1 2020.

Analysts have expressed that the low-yield on government securities impacted on banks interest generated from T-Bills and bonds, maintaining that banks might recouped lost interest income on securities in the second half of 2021.

The Head, Retail Investment, Chapel Hill Denham, Mr. Ayodeji Ebo in a telephone chat with THISDAY attributed the decline to banks interest rate generated from T-bills and bonds to reinvesting in lower rate securities.

According to him: “Upon maturity, most banks are reinvesting in government securities at a lower rate. Mind you this year, banks haven’t had major opportunity in making money from government securities. A lot of banks lot money and you can see it from their classification. Some of the banks have to move their value for sale to held to maturity.”
Analysis of the banks results showed that Zenith Bank Plc’s total interest income on securities dropped by nine per cent to N61.86billion in H1 2021 from N67.9billion in H1 2020.

The breakdown revealed that interest income generated from T-bills dropped by 29 per cent to N20.3billion in H1 2021 from N28.38billion in H1 2020, while interest income from government and other bonds inched up marginally by five per cent to N41.58billion in H1 2021 from N39.52billion in H1 2020.
This brings the bank’s total interest income for the period to N203.9billion, a decline of six per cent from N216.95billion in H1 2020.

On its part, FBN Holdings reported 56.3 per cent drop in its interest income from Investment securities to N31.76billion in H1 2021 from N72.64billion in H1 2020, while GTCO’s interest income from investment securities (Investment Securities FVOCI & Investment securities at amortised cost) dropped by 62 per cent to N19.2billion from N50.2billion in H1 2020.

As Union Bank of Nigeria reported 65 per cent drop in its interest income on Investment securities to N5.07bllion in H1 2021 from N14.68billion in H1 2020; Access bank grew its interest income on investment securities by 134.5 per cent to N92.1billion in H1 2021 from N39.3billion in H1 2020.
Fidelity Bank was among the banks that recorded decline in its interest income on securities to N10.23billion in H1 2021 from N19.63billion in H1 2020.

In addition, UBA reported 3.3 per cent increase in interest income generated from investment securities to N84.93billion in H1 2021 from N82.19billion in H1 2020.
Analyst at PAC Holdings, Mr. Wole Adeyeye said yield generated by banks on securities investment in the first half of 2021 depreciated when compared to that of last year.

He noted that yield is expected to bounce back in the second half of 2021.
After hitting a four-year low of near-zero percent in 2020, yields on the federal government risk-free T-bills climbed to more than 13 months high in March 2021.

According to the T-bills auction result for March 10 2021, investors bid at a rate as high as 8 per cent for the 91-day bill, 9.5 per cent and 10.5 per cent for the 182-day and 364-day bills, respectively, but CBN settled at two per cent, 3.5 per cent and 6.5 per cent, respectively.

The stop rates for the 91-day and 182-day bills stayed flat but the 364-day bill increased by 100 basis points compared to the result of the previous auction.
From a yield record low level of 4.05 per cent in November 2020, Nigerian 10 years’ government bond climbed to 10.62 per cent in March 2021.

The recent rise in the yield on government instrument is cheering news for domestic investors who for almost two years had a return that was much lower than Nigeria’s inflation rate.

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