Darasimi Adebisi
Amid low-yield environment, Ecobank Transactional Incorporated (ETI), Access Bank Plc, eight others banks spent N432.96billion on serving customers’ accounts and borrowings in first half (H1) of 2021.
This represents a decline of 10.5per cent from N483.73billion recorded in prior half year of 2020.
A breakdown of the banks results revealed that they incurred N286.5billion as interest expenses on deposits’ from customers in H1 2021 as against N359.86billion in H1 2020.
Also, the interest the banks paid on borrowings closed H1 2021 at N146.5billion from N123.87billion in H1 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, total expenses incurred by these 10 banks also dropped 10.7 per cent to N542.76billion in H1 2021 from N607.6billion recorded in H1 2020.
The low-yield environment reflected on these banks expenses on Deposits from customers as nearly all recorded decline aside ETI that gained 2.5 per cent to N57.71billion in H1 2021 from N56.32billion in H1 2020.
The apex bank at the Monetary Policy Committee (MPC) Meeting of September 22, 2020 voted to reduce the Monetary Policy Rate (MPR) by 100 basis points from 12.5 to 11.5 per cent.
Analyst at PAC Holdings, Mr. Wole Adeyeye explained to THISDAY that cost of funding in H1 2021 dropped, leading to banks recording decline on interest expenses from deposits from customers.
According to him: “When the Central Bank of Nigeria (CBN) reviewed MPR from 12.5 per cent to 11.5 per cent, cost of funds actually dropped, leading to interest expenses on deposits from customers recorded by these banks in the period under review.”
Access Bank Plc, for instance reported 11.05per cent decline in its interest expenses on Deposits from customers’ to N56.77billion in H1 2021 from N63.83billion in H1 2020, while GTCO also recorded 24.4 per cent decline in interest expenses on Deposits from customers to N16.8billion in H1 2021 from N22.24billion recorded in H1 2020.
Further analysis of the banks results revealed that UBA recorded 20.5 per cent drop in interest expenses on deposits from customers to N42.4billion in H1 2021, while FBN Holdings interest expenses on deposits from customers dropped to N30.8billion, a 41.5 per cent drop from N52.72billion recorded in H1 2020.
Zenith Bank recorded 38.5 per cent interest expenses on deposits from customers to N26.16billion in H1 2021 from N42.5billion recorded in H1 2020.
In addition, Fidelity Bank’s interest expenses on deposits from customers moved from N26.27billion in H1 2020 to N24.35 billion in H1 2021 while Stanbic IBTC Holdings recorded about 49 per cent decline in interest expenses on deposits from customers to N5.86 in H1 2021 from N11.48billion in H1 2020.
Union Bank of Nigeria for the period recorded 16.09 per cent drop in interest expenses to N12.46billion in H1 2021 from N14.8billion recorded in H1 2020 as FCMB Group Plc. Recorded N13.08billion interest expenses on deposits from customers in H1 2021 from N16.24billion recorded in H1 2020.
Commenting also, analyst, Rotimi Fakayejo explained to THISDAY the slow growth in deposits from customers in the period was responsible for the outcome.
He explained that: “The banking sector in H1 2021 witnessed weak deposits from customers despite the CBN directive on 65 per cent Loan-to-deposit ratio policy.
“In essence, there was no aggressive deposit in the banking sector as banks were taking caution. The little deposit banks have can’t be exhausted in lending which definitely crashed rates and reduce interest expenses.”
