Darasimi Adebisi
On the heels of reporting 9.6 per cent and 5.3 per cent increase in operating expenses and operating income respectively, FBN Holdings leads other Tier-1 banks in Cost-to-income ratio for half year ended June 30, 2021.
Cost-income is a ratio between the costs involved in running a business and the income the business produce.
The ratio is important for determining the profitability of a bank and it gives a clear view of how efficiently the bank is being run- the lower the ratio, the more profitable the bank.
The Holdings financial institution recorded 68.60 per cent Cost-income ratio in H1 2021 from 65.80 per cent recorded in H1 2020.
Analysts have noted that double-digit inflation rate often play critical role in increasing Cost-to-income ratio which at the end affects companies earnings.
Notably, Guaranty Trust Holdings Company Plc (GTCO) has one of the lowest cost-to-income ratio in the banking industry.
With 7.2 per cent increase in operating expenses, GTCO’s Cost to income ratio was setting at 48.98 per cent in H1 2021 from 43.16 per cent recorded in H1 2020, attributable to increase in regulatory cost as the Group continued to remain cost efficient without hurting its business and future performance.
Operating expenses for the reviewed period grew by 7.2 per cent from N83.3billion in H1 2020 to N89.3billion in H1 2021 due to the impact of rising inflation and marginal Naira/Dollar rate movement in the official market, which resulted in the increase in general prices of goods and services.
However, Zenith Bank Plc reported 56.10 per cent Cost to income ratio in H1 2021 from 54.30 per cent in H1 2020.
The bank said the 3.6 per cent increase in cost to income ratio is due to inflationary pressures and regulatory costs.
Meanwhile, Access Bank Plc reported drop in cost to income ratio to 60.10per cent in H1 2021 from 65.80 per cent reported H1 2020 as United Bank for Africa Plc (UBA) also reported 62.30 per cent drop in cost to income ratio in H1 2021 from 67 per cent recorded in H1 2020.
UBA’s Group Managing Director/Chief Executive Officer, Mr. Kennedy Uzoka pointed out that the bank recognises the far-reaching effects of the pandemic on businesses globally, and remains focused on its promise to always provide our customers with the best banking experiences possible.
“Our H12021 performance reflects our progressive efforts in building on the strong momentum that we started the year with.
“As a purpose-driven organisation, we remain resolute in our drive for sustained growth in customer acquisition, transaction volumes and balance sheet, as we consolidate our ‘Africa’s Global Bank’ market position in the years ahead, uplifting livelihoods across the continent,” Uzoka explained.
