Two-tier one banks, First Bank of Nigeria and Zenith Bank have raked in their highest half-year income from account maintenance charges in the last eight, finding by BusinessDay has shown.
According to BusinessDay’s findings, First Bank of Nigeria and Zenith Bank collectively generated N28.88 billion from accounts maintenance fees in the first half (H1) of 2022, a 21.19 percent increase from N23.83 billion generated in the first half of 2021.
Data from the Nigerian Exchange Group (NGX) also showed Zenith Bank led with the highest income from account maintenance in the 6-month period of 2022, accounting for N19.77 billion of the N23.83 billion generated by both banks.
Zenith bank’s six months 2022 performance represents an increase of 24.3 percent compared to N15.9 billion recorded in the previous year and is one of the main drivers for the boost in net fee and commission income in the first half of 2022.
Zenith Banks’ net fee and commission income grew by 35.23 percent to N64.45 billion in the first half of 2022 from N47.66 billion in the first half of 2021.
However, on a quarterly basis (q/q), net fees and commissions were down 7.5 percent in the second quarter of 2022 compared with the first quarter of 2022.
A segmental analysis in the notes to the account of the financial statement shows that the bank’s total income on fees and commission in the first half of 2022 was generated from Nigeria’s corporate retail and pensions custodian services (N71.79 billion), Africa (N4.69 billion), and Europe (N2.01 billion).
Similarly, its fees and commission expenses in the first quarter of 2022 were derived from Nigeria’s corporate retail and pensions custodian services (N13.6 billion), and Africa (N407 million).
Other Income (trading gains and other operating income) was up 6.7 percent year on year (y/y) but grew q/q by 156 percent.
The year-on-year growth was driven mainly by a 43.7 percent y/y growth in trading gains, mainly gains on treasury bills Fair Value Through Profit or Loss (FVTPL).
Read also: Fidelity: Full year scorecard reflects disciplined execution of bank’s growth strategy
Overall, the bank’s profit after tax grew 4.9 percent y/y to N111.4 billion from N107.2 billion, bringing H1 2022 annualised ROAE to 17.5 percent compared to 18.8 percent for H1 2021.
In the same vein, account maintenance fees reported by First Bank increased by 14.88 percent year on year to N9.11 billion in the first half of 2022 from N7.93 billion in the corresponding period of 2021.
The growth in account maintenance fees and letters of credit commissions and fees are the primary drivers of the bank’s net fees and commission income.
The bank reported a net fee and commission income of N58.37 billion in the first half of 2022, higher than N57.37 billion in the first half of 2021.
On a quarterly basis, net fee and commission income were up 13.6 percent in Q2 compared with Q1 2022 primarily driven by growth in e-banking fees, up 9.5 percent q/q, and a 21.8 percent q/q growth in letters of credit commissions and fees.
Other Income (foreign exchange income, net gains on investment securities, net gains or loss on financial instruments held at FVTPL, dividend income, other operating income) declined q/q, down 44.1 percent in Q2 2022 compared with Q1 2022, driven mainly by a 46.4% decline in net gains on the sale of investment securities and a net loss from financial instruments at FVTPL of N3.5 billion compared with a gain of N14.8 billion in Q1 2022.
The bank’s net profit was up 48.6 percent y/y to N56.5 billion in the first half of 2022 from N38 billion in the first half of 2021, bringing H1 2022 annualized ROAE to 12.8 percent compared with 9.9 percent in H1 2021.
However, on a quarterly basis, net profit was down 25.5 percent to N24 billion in the second quarter of 2022 from N32 billion in the first quarter of 2021.
What you should know about account maintenance charges
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 directive by the Central Bank of Nigeria (CBN) on bank charges, Nigerian banks are allowed to charge their customers a “negotiable” N1 per mille.
What this means is that banks can charge N1 per N1000 debit transactions on current accounts. Banks’ account maintenance charges come in the form of COT (i.e., Commission on Turnover) which is a charge levied on customer withdrawals by their banks. In Nigeria, these charges are mainly applicable to current accounts.
