Stanbic IBTC Holdings, and five other tier-2 financial institutions, in the course of last year (2022), have spent no less than N413.5 billion on customer deposits and local/foreign borrowings. This development follows the aggressive inflation targeting that lead to a consistent hike in the Monetary Policy Rate (MPR) by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which culminated at 16.5% in the year.
The other banks -Fidelity Bank Plc, Unity Bank Plc, Wema Bank Plc, FCMB Group Plc, and Sterling Bank Plc.
BizWatch Nigeria understands that the banks were forced to increase interest on customers’ deposit/borrowings in a move to attract more deposits, generate interest income and boost profit.
Prior to this development, CBN Governor, Godwin Emefiele had admitted that the hike in MPR would increase the cost of borrowing, especially in non-priority sectors of the economy.
Emefiele, however, added that lending to key priority sectors, which had been identified to boost growth and generate employment, would remain at a single-digit interest rate of nine per cent.
He pointed out that the decision to raise the interest rates was the last resort and a difficult one for the MPC, which had been crafting policies to stimulate economic growth as well as achieve financial stability.
Since the MPR was moved to 16.5 per cent by the MPC from 11.5 per cent, interest rate on 12-month deposit hit 8.22 per cent in 2022 from 6.79 per cent it closed in 2021.
Also, interest on a one-month savings deposit also increased from 3.73 per cent to 8.15 per cent.
A breakdown of the figure
The breakdown revealed that Wema Bank reported N53.23 billion in interest expenses on customers’ deposit/ borrowing, representing an increase of 52.4 per cent from N34.92 billion in 2021, while FCMB Group announced N97.58 billion interest expenses in 2022, 37.19 per cent increase from N71.13 billion in 2021.
As Stanbic IBTC Holdings reported N39.55 billion interest expenses to N29.38 billion in 2021, Fidelity Bank announced N141.62 billion interest expenses in 2022, representing an increase of 30.3 per cent from N108.69 billion reported in 2021.
In addition, Unity Bank’s interest expenses moved to N29.64 billion in 2022, an increase of 28.2 per cent from N23.13 billion in 2021, while Sterling Bank posted N51.87 billion interest expenses on customers’ deposit/borrowings in 2022, representing a growth of nearly 15 per cent when compared to N45.19 billion in 2021.
As interest on deposit/borrowing increased, the hike in MPR impacted on the maximum lending rate that closed 2022 at 29.13 per cent from 27.58 per cent in 2021.
These banks leveraged on the hike to grow interest income in 2022 as the six Tier-2 banks generated a total of N1.01 trillion as against N756.6 billion in 2021.
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