TIER 2 Banks in Nigeria recorded N233 billion drop in deposit in the first half of 2017 following demand for higher deposit rate by customers.
Banks’ customers were said to be pushing for higher deposit rate against the backdrop of the high interest rate regime created by the monetary policy of the Central Bank of Nigeria (CBN) in its quest to curb inflation and reduce demand for foreign exchange.
H1 2017 financial statements of six Tier-2 banks namely Diamond Bank of Nigeria Plc, Wema Bank Plc, Unity Bank Plc, FCMB, Sterling Bank Plc and Union Bank of Nigeria Plc revealed that four of the banks recorded decline in total customers’ deposit during the six months period.
The results also revealed that five of the banks recorded decline in current account deposit and four recorded decline in term deposits.
However, five of them recorded increase in their savings account portfolio. Total customers’ depositWema Bank led the decline in customers’ deposits, losing 10.9 per cent or N31 billion of its total deposit, which dropped to N252.7 billion at the end of June 2017, from N283.3 billion recorded in the preceding half (at the end December 2016, H2 2016).
Unity Bank followed with 10 per cent or N10 billion drop to N254 billion from N264 billion; FCMB recorded 3.7 per cent or N25 billion drop in deposits to N633 billion at end of June 2017, from N658 billion as at December 31st 2016; Diamond Bank on its part recorded 1.8 per cent or N25 billion decline in deposit to N1.39 trillion as at June 30 2017, from N1.42 trillion as at December 31st 2016.
However, Union Bank recorded 15.3 per cent or N101 billion increase in deposits to N759 billion from N658 billion during the six months period. Similarly, Sterling Bank recorded 4.2 per cent or N25 billion increase in deposits to N609 billion from N584 billion.
Current accounts depositsFurther analysis revealed that all the banks except Union Bank recorded decline in current account deposits.
Wema Bank’s current account deposits recorded 11.4 per cent or N10 billion decline to N78 billion at end of H1‘17 from N87.9 billion at end of December 2016. Unity Bank followed with 10.6 per cent or N13 billion decline, to N110 billion from N123 billion; FCMB recorded 7.7 per cent or N93 billion decline to N286 billion from N310 billion; while Diamond Bank recorded 4.0 per cent or N28 billion decline, to N697 billion from N726 billion during the six months period.
Union Bank, however, grew its current account deposits by 35.9 per cent or N93 billion to N352 billion from N259 billion during the same period.
Term depositsFurther analysis showed that four of the six tier-2 banks recorded decline in term or fixed deposits in H1‘17.
These include Wema Bank which recorded 16.9 per cent or N24 billion decline, to N118 billion from N142 billion; Sterling Bank recorded 6.9 per cent or N14 billion decline to N188 billion from N202 billion; Unity Bank declined 4.5 per cent or N4 billion to N85 billion from N89 billion; while FCMB recorded 4.8 per cent or N10 billion decline, to N197 billion from N207 billion.Diamond Bank was however able to grow its term deposits by 27.6 per cent or N55 billion to N254 billion from N199 billion.
Similarly, Union Bank recorded marginal increase of N1 billion in its term deposits to N231 billion from N230 billion. Savings accounts deposits of the six banks, with exception of Diamond Bank were able to grow their savings deposits, which collectively rose by 7.4 per cent or N64 billion to N924 billion at end of June 2017 from N860 billion as at December 31st 2016.
Unity Bank led the increase in savings deposits, recording 8.6 per cent or N4 billion increase to N50 billion from N46 billion. FCMB came second recording 7.1 per cent or N7 billion increase to N150 billion from N140 billion.
Wema Bank recorded 4.4 per cent or N2 billion increases to N47.2 billion from N45.4 billion; Union Bank recorded 4.1 per cent or N7 billion increase to N176.4 billion from N169 billion during the six months period.Diamond Bank however recorded 10.4 per cent or N52 billion decline in savings deposits to N447 billion as at June 2017 from N499 billion at end of December 2017.
Interest rate challengesThe banks blamed the decline in deposits, especially term deposits on the high interest rate on government securities induced by the restrictive monetary policy of the CBN.
In a bid to checkmate inflation, which rose to a peak of 18.72 per cent in January, restrained demand for foreign exchange as well as attract foreign currency inflow from foreign portfolio investors, the CBN had kept its Monetary Policy Rate (MPR) at 14 per cent since July 2016 while offering treasury bills at interest rates as high as 20 per cent.
