– Why Customers aren’t operating their accounts’
For six top Deposit Money Banks in Nigeria, re-strategising through the introduction of new products has paid off, as customer deposits increased in the 2017 financial year, despite the general drop in the number of active customers’ accounts across the banking sector.
Investigations by The Point revealed that the deposit base of the banks increased by N1.4 trillion, from N14.4 trillion as at the end of 2016 to N15.8 trillion at the end of 2017.
The banks are United Bank for Africa Plc, Access Bank Plc, Zenith Bank Plc, GTBank Plc, Ecobank Transnational Incorporated Plc and Stanbic IBTC Plc.
Zenith Bank’s customer deposit increased from N2.98 trillion as at 2016, to N3.43 trillion in 2017, while Access Bank grew its deposit by 7.45 per cent, up from N2.08 trillion in 2016 to N2.24 trillion in 2017. UBA’s customer deposit inched up from N2.59 trillion in 2016 to N2.86 trillion in 2017.
While ETI reported customer deposits worth N4.65trillion in 2017, up from N4.11 trillion in 2016; GTBank recorded N2.06 trillion in 2017, up from N1.98trillion in the 2016 financial year. Stanbic IBTC grew its deposits, from N614.73billion in the comparative period of 2016, to N815.36 billion in 2017.
Recall that the Nigeria Inter-Bank Settlement System had reported that the number of active bank customers’ accounts reduced by 1.5 million, as it dropped from 65 million to 63.5 million, between 2016 and 2017.
WHY CUSTOMERS AREN’T OPERATING THEIR ACCOUNTS
Some analysts and market watchers, who predicted a general drop in customer deposits of banks, however, offered explanations for the recorded increase in some of the financial institutions.
Taking into consideration the fact that most of the banks had been battling with high level of toxic loans and operational cost since the beginning of the year, some of the experts agreed that the banks had re-strategised by introducing new products to drive their deposits.
But a reliable source in one of the top six banks, who asked not to be named because of his position, insisted that the reduction in the deposits of some banks was not unconnected with the Federal Government’s fight against corruption.
“When Buhari assumed office, many people abandoned their accounts, especially civil servants, because of fear of investigation. Within that period too, some people had closed down their accounts, outright, while others opted for gradual withdrawal so as not to raise eyebrows,” he said.
The source also blamed the development on the Bank Verification Number spread, as he argued that the exercise prevented some depositors, especially in the rural areas, from running their accounts with the bank.
But a member of Faculty, Lagos Business School, Dr. Owolabi Akintola, said depositors had been encouraged, to a large extent, to deposit their money with confidence, “taking into consideration the enhanced security measures adopted by the banks, especially with the advent of BVN, as such would, at least, reduce fraud to the barest minimum.”
The Dean, School of Business, University of Uyo, Prof. Leo Ukpong, also explained that although the six banks had recorded growth in their customers’ deposit for the 2017 financial year, their increasing non-performing loan was of great concern.
“The six banks’ average NPL ratio collectively jumped to 7.91 per cent against 4.58 per cent in 2016. This was why the Central Bank of Nigeria stopped the banks with high NPL ratio and low capital adequacy ratio from paying dividend to shareholders,” he said.
Speaking from a different perspective, the Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, observed that the tier-II banks were always on the move to raise more capital and compete in the market.
He said, “Tier-II banks do more of short-term loans at higher interest, though risky, a move to limit their loss–absorption capacity against unexpected losses. It is more about the returns tier-II banks are able to generate. They have assets turnovers, which show that they are able to turn around the limited resources faster than the Tier-I banks that have sufficient capital, and can give out loan on a long-term basis.
“Agreed, Tier-II banks may have limited capital base but they are also able to work around it and make efficient use of it. It is expected that they would be able to access more capital to boost their CAR, going forward.”
He, however, advised the Federal Government to pursue a policy of fiscal consolidation through higher non-oil revenues, to ensure stability in the economic growth generally.
‘2017 WAS BETTER THAN 2016’
The Group Chief Executive Officer, ETI, Mr. Ade Ayeyemi, said the 2017 financial performance was an encouraging improvement on 2016, as all actions to improve the bank’s efficiency were productive.
According to him, customers also showed their confidence in the company’s value proposition by giving it more of their deposits, which grew by 13 per cent to N4.65 trillion in 2017, as against N4.12 trillion in 2016.
He noted that the progressive moves to right-size and simplify the company’s businesses were designed to allow it to serve its customers better and create more sustainable value generation.
“2017 also marked two years into our five-year ‘Roadmap to Leadership’ and digitisation strategy through which we have made real strides in fixing the foundations on which our businesses can grow,” he said.
The Group Managing Director, Access Bank, Mr. Herbert Wigwe, said, “Our operating performance in 2017 was impacted by the residual effects of macro-economic conditions of 2016, characterised by slow economic expansion and adverse credit conditions, which resulted in making conservative provisions on our loan book.
“Despite the macro and regulatory headwinds, our underlying business remained strong as reflected in the gross earnings growth of 20 per cent, to N459 billion in 2017. We grew our loan book to position it for improved earnings, while driving deposit mobilisation from targeted segments to diversify our funding base.”