Bank customers explore alternative investment window as charges rise

Customers of Deposit Money Banks (DMBs) are exploring alternative investment and savings outlets as lenders increase charges on SMS alert and annual maintenance fees in their continued bid to remain competitive in the industry, BusinessDay investigations indicate.

Consequently, customers and other investors may have safe havens and indicated preferences for Treasury Bills (NTB) and Fixed Deposit (FD) where they can get better and safe yields after price haggling with their banks, further investigations revealed.

The full implementation of the zero Commission On Turnover (COT) which began last week may have compounded the woes of banks facing dwindling cheap revenue. This is in addition to the  Treasury Single Account (TSA) implementation and the monetary policy rate currently at 11 percent, but regarded too high.

But some customers are insisting that the only way out for them is to explore other outlets since they claim that some banks are exploiting them . “I was charged twice in October for SMS alert by one of the tier 1 banks”, a customer told BusinessDay.

The immediate effect is the large issuance of the instruments by government, following mass drift. Consequently, the 91-182 and 364-day instruments issued and allotted first half of 2015 as the most current report released by the Central Bank of Nigeria (CBN) increased by 35.40 percent to N2.2 trillion, compared with N1.6 trillion between July and December 2014.

According to the CBN, the total public subscriptions stood at N5,213.20 billion in the first half of 2015, reflecting a significant increase when compared with N2,434.19 billion in the preceding period. This increase was traceable to renewed investors’ interest in the market.

Apart from looking to other investment windows, some industry observers are concerned that this development may drive customers back to ‘under-pillow-savings’.

But Olutola Oni, analyst at WSTC Financial Services limited said, “We do not expect customers to return to “under-pillow” savings as a result of “excessive” bank charges and low interest rate. Rather, we expect them to find other more attractive investment windows during the year.

Oni understands that 2016 is going to be somewhat challenging for banks in the light of operating and regulatory induced pressures. Notwithstanding, Oni believes that most of the tier one banks will remain resilient.

“We expect banks to adopt competitive strategies in growing retail business in 2016. Also, we expect them to focus on efficiency in operations through the use of technology in order to contain cost”, he said in an email response.

Tajudeen Ibrahim, head of Equity Research, Chapel Hill Denham Securities Limited, said banks need to be more proactive and innovative in their products and services.

“We believe banks that ensure customers’ experience are significantly better in 2016 than 2015 will gain market share in retail banking. This is considering the lower interest rates on deposits in 2016 versus 2015”, he told BusinessDay in an e-mailed response.

HOPE MOSES-ASHIKE