Performance sluggish, unimpressive – Experts
Despite the effect of the COVID-19 pandemic on world economies, five top Deposit Money Banks in Nigeria managed to record N2.23 trillion total marginal increase in Customers’ Deposits, from N15.48 trillion in the first quarter of 2019, to N17.71 trillion in the first quarter of 2020.
The banks are United Bank for Africa Plc, Zenith Bank Plc, Access Bank Plc, GTBank Plc and Fidelity Bank Plc.
A detailed analysis of the banks’ performance showed that UBA’s Customers’ Deposits rose from N4.1 trillion in the first quarter of 2019, to N4.67trillion in the comparable period of 2020. Zenith Bank followed, rising from N3.57 trillion in customers’ deposits, in the first quarter of 2019, to N4.46 trillion in the review period of 2020.
Others are Access Bank Plc, which recorded an increase in customers’ deposits, from N4.26trillion in the first quarter of 2019, to N4.46 trillion in the same period of 2020. GTBank also reported a marginal increase, from N2.53 trillion in the first quarter of 2019, to N2.77 trillion in 2020.
For Fidelity Bank Plc, its customers’ deposits inched up from N1.02 trillion in 2019, to N1.35 trillion in the first quarter of 2020.
The three months performances of the financial institutions, according to financial analysts and Capital Market operators, confirmed recent movements of the macroeconomic performance indicators, which were all in negative territories.
Market pundits said the first quarter performance of the banks’ deposit base was not impressive, even though there was a slight increase in value.
An economic expert and Capital Market operator, Mr. Yusuf Murphy, said the impact of the global pandemic might have contributed greatly to the sluggish and unimpressive performance of the banks’ deposit base in the first three months of the year.
Murphy explained, “The emergence of the Coronavirus pandemic started way back in November 2019 in China, and the United States, affecting the Global Oil markets.
According to him, because the world is a global village, the decline in the oil price trickled down to Nigeria, which depends solely on oil revenue. “The country’s annual Gross Domestic Product grew by 1.8 per cent on a weak non-oil sector performance, which also affected, not only the banking sector, but all other economic indices in the country,” he said.
However, analysts at Cowry Assets Management Company said, with the decline in crude oil prices, especially in the month of April 2020, coupled with the significant reduction in transactions in the non-oil sector amid lockdown orders, “we expect a negative growth in the second quarter of the economy.”
They blamed the sluggish increase of banks’ deposits on the high interest rate on government securities, induced by the restrictive monetary policy of the Central Bank of Nigeria.
Managing Director/Chief Executive Officer, Heritage Assets Management Company, Mr. Olumuyiwa Adekola, insisted that the unimpressive performance in the banks’ deposits was not unconnected with the Federal Government’s policy inconsistency, the impact of the pandemic and the decline in the crude oil market.
Speaking from a different perspective, the Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, observed that the banks were always on the move to raise more capital and compete in the market.
He said the banks did more of short-term loans at higher interest, adding that, though risky, this was 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,” the analysts said.
Shareholders fret over returns on investment
As expected, banks’ shareholders said whichever direction the music played, the shareholders would bear the brunt of the marginal increase in the banks’ results, because it would greatly affect their return on investment at the end of the financial year.
The National Chairman, Progressive Shareholders Association, Mr. Boniface Okezie, said, “We as shareholders expect good returns on our investment. It is not new that the banks are dominating, due to the ways the economy works, but what matters to us is what we take home at the end of the day.”
He noted that the banks had the money of both the government and the citizens; while the cash in their vaults dictated the direction of the economy.
“Until our values and our economy change from cash to gold, the banks would continue to be the deciding factors of the economy,” he added.
Meanwhile, the Group Managing Director, UBA, Mr. Kennedy Uzoka, assured both depositors and shareholders of his bank of a greater future.
“We will continue to gain momentum in our efforts to increase our customers’ deposits and achieve more diversified earnings, as we strengthen our retail and digital offerings. Our bank remains committed to improving the quality of its balance sheet,” he said.
However, some of the banks’ corporate affairs managers, when contacted, declined to comment on the grounds that they were not in a position to speak on the issue.