Tier-one banks raked in N65bn from maintaining bank accounts in 2019
…22.28% increase from 2018 figures
Customers of Nigeria’s tier-one banks paid a combined N65.5 billion to the lenders for maintaining their bank accounts in 2019.
Analysis of the banks’ 2019 financials revealed the five lenders received an account maintenance charge that was 22.28 percent higher than the N53.59 billion collected from customers in the corresponding period of 2018.
The banks’ record-high earnings from account maintenance were catalysed by the 11.33 percent surge in active bank accounts recorded in the same year.
Nigeria’s active bank accounts increased to 79.28 million in December 2019, 8.1 million higher than the 72.21 million reported in the previous year, data from Nigeria Inter-Bank Settlement System Plc (NIBSS) show.
Yinka Ademuwagun, research analyst at Lagos-based investment advisory firm, United Capital plc, said this points to the fact that banks are leveraging financial technology (Fintech) to grow their customer base.
“Most banks are seen to be exploiting Fintech such as Chatbot, USSD and internet banking to penetrate the economy and bank the unbanked,” Ademuwagun said.
Analysis of the lenders’ performance revealed Zenith Bank, Nigeria’s most valuable banking brand according to Banker Magazine Top 500 Banking Brands 2020, attracted the most from maintaining its customers’ bank accounts at N19.63 billion. The earnings were N10.62 billion higher than the N18 billion it reported in the year-earlier period.
With a brand value of $287 million and market capitalisation of $1.62 billion, ranking 392 in the 2020 global ranking of banks, Zenith Bank, for the third year running, has been ranked the number one banking brand in Nigeria.
Reaping the fruit of its merger with Diamond Bank, Access Bank, Nigeria’s largest retail bank, reported an increase by N7.57 billion to post N14 billion as earnings from account maintenance charges. This was more than double the N6.43 billion it reported before the merger in 2018.
“Most banks are recording a significant increase in ATM issuances as well as transactions done by them. These remain significant drivers of these growths,” Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL Stockbrokers, said.
Meanwhile, Nigeria’s Central Bank in the last quarter of 2019 approved that bank customers should pay additional charges on deposits and withdrawals and, according to industry analysts, this was also one of the reasons for the surge in account maintenance charges.
To achieve its cashless policy drive, CBN said in a circular issued to all banks on September 17, 2019 that the new charges on depositors apply to those in Lagos, Ogun, Kano, Abia, Anambra, Rivers and the FCT immediately.
The statement further stated that the new charges would be in addition to existing charges on withdrawal, effective September 18, 2019.
According to the circular, the charges would attract 3 percent processing fees for withdrawals and 2 percent processing fees for lodgments of amounts above N500,000 for individual accounts.
For corporate accounts, the apex bank in the circular said that DMBs would charge 5 percent processing fees for withdrawals and 3 percent processing fee for lodgments of amounts above N3,000,000.
Further analysis of the banks’ financials revealed that FBN Holdings also attracted double-digit earnings from maintaining the bank accounts of its customers. The bank raked in N13.17 billion as account maintenance charges, 6.81 percent increase when compared to the N12.33 billion reported in the preceding year.
Guaranty Trust Bank, which posted 6.6 percent increase in its profit after tax of N196.8 billion as against the N184.7 billion achieved in the corresponding period for 2018, attracted N11.59 billion for maintaining its customers’ bank accounts last year.
The lender reported a 9.55 percent increase from account maintenance charges compared to the N10.58 billion recorded in 2018.
With a 13 percent increase in profit after tax, United Bank for Africa (UBA) attracted N7.15 billion from maintaining its customers’ bank accounts in 2019. This is compared to the N6.25 billion the bank raked in the previous year.
While the bank was the only tier-one one bank that attracted single digit as earning from account maintenance charges, it recorded a profit of N89.1 billion (FY 2018: N78.6 billion), supported by a lower effective tax rate of 20 percent in FY 2019 compared to 26 percent in FY 2018.