9’M 2021: Tier one banks generate N71.9bn from account maintenance charges

The tier 1 banks in Nigeria, in no particular order – Access Bank, First Bank Nigeria, Guaranty Trust Bank (GTB), United Bank for Africa (UBA) and Zenith Bank Plc generates N71.9 billion from account maintenance charged on their customers’ accounts in the first nine months of 2021, a BusinessDay analysis has shown.

Data gleaned from Nigerian Exchange Group (NGX) show Zenith Bank led the list of banks with highest income from account maintenance in the 9-month period of 2021, accounting for N24.18bn of the N71.9 billion generated by banks listed on the Nigerian Stock Exchange.

The bank’s nine months 2021 performance represents an increase of 41.9 percent compared to N15.8 billion and N17 billion recorded in the previous years of 2019 and 2020 respectively.

The development in Zenith Bank’s account maintenance pushed the bank’s Profit after tax to N160 billion from N159 billion in the corresponding period. Also, Gross earnings rose to N518.7 with 1.92 percent increase.

Access Bank, the largest financial institution in the country by customer base and total assets value, boasted of a N16.2 billion income from account maintenance charges, representing a 50.9 percent increase compared to N10.7 billion recorded in a similar period of 2020.

GTCO generated a sum of N13.02 billion from account maintenance income between January and September 2021. This represents a 36.5 percent increase compared to N9.54 billion recorded in the corresponding period of 2020. Compared to N8.54 billion recorded in 9-month 2019, account maintenance income increased by 52.5 percent.

First bank ranked fourth with account maintenance income of N11.7 billion from N8.8 billion with a total profit after tax of N40.8 billion in 2021. Net fee and commission rose with a 17.7 percent increase to N85.9 billion.

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Specifically, profit after tax dropped by 24.8 percent to N40.85 billion in the 9-month period of 2021 compared to N54.4 billion recorded in the previous year.

United Bank for Africa was the fifth-ranked with a record of N7.1 billion account maintenance from N5.9 billion in the previous financial year. The profit after tax rose by 36 percent from N77 billion to N104.6 billion in 2021. Net fee and commission income increased to N67.9 billion from N56 billion in the previous financial year.

The tier one banks total earnings of N71.9 billion from account maintenance is an increase of about 38.5 percent from N51.9billion generated in the corresponding period in 2020.

Banks’ earnings from account maintenance charges, though low when compared to other revenue streams, still make up a significant portion of their non-interest income.

According to the Central Bank of Nigeria’s ‘The Guide to Charges by Banks, other Financial and Non-Bank Financial Institutions Current Account Maintenance Fee’ (CAMF) is applicable to current accounts only in respect of customer-induced debit transactions to third parties and debit transfers/lodgments to the customer’s account in another bank.

The CBN stresses that CAMF is not applicable to savings accounts and is negotiable subject to a maximum of N1 per mille.

The CBN also added guidelines for internet banking. It put N2,500 as the maximum cost for a hardware token. It said bills payment including bills payment through other e-channels should cost a maximum of N500. It gave a range of costs for electronic funds transfer.

It said transactions below N5,000 should cost N10; transactions between N5,001 – N50,000 should cost N25, while those above N50,000 should cost N50.

In its 2020, annual report, Access Bank said, “Our channels business has continued to record significant growth by taking advantage of the digital explosion accelerated by the pandemic.”

The bank added that it had over 13.1 million retail customers.

Access bank defined account maintenance fees as fees charged to current accounts. It said it charged N1 on every N1,000 in respect of customer-induced debit transactions.

The bank added that the fees were earned by it at the time of each transaction.

GTB in its annual report said, “The COVID-19 pandemic also came during the time that the Central Bank released a revised guide to bank charges with significant impact on fees and commission line.

“The bank’s e-business income reported under the Fee and Commission line was the worst hit owing to the implementation of the CBN guidelines on NIP charges.”