By Babajide Komolafe

THE top five banks in the country recorded N363 billion decline in customers’ deposit in the first half of 2017, H1’17, reflecting their inability to meet up with demand for higher interest rate by customers. The banks are Access Bank, First Bank, Guaranty Trust Bank, United Bank for Africa Plc (UBA), and Zenith Bank Financial Vanguard analysis of the recently released H1‘17 financial statements of the five banks revealed that total customers deposit dropped by 2.85 per cent to N12.29 trillion at end of June 2017, from N12.65 trillion at the end of December 2016.

Financial Vanguard had last month exclusively reported that bank customers were pressurising for higher interest rate in a bid to take advantage of the high interest rate regime occasioned by the monetary policy of the Central Bank of Nigeria (CBN) in its quest to curb inflation and stabilise the naira exchange rate.

The report, which revealed N233 billion decline in deposit of Tier-2 banks, showed that banks were de-emphasising costly Fixed Deposit accounts and focusing on Savings Deposits which attracts lower interest rate, indicating banks’ resistance to customers’ demand for higher interest rates on their deposits.
Financial Vanguard analysis of the H1‘17 financial statements of the five tier-1 banks revealed a pattern similar to tier-2. While collectively the five banks recorded declined Fixed and Current account deposits, they, however, recorded increase in their Savings Account Deposits.

Total customers’ deposits

Analysis revealed that the five banks recorded N363 billion or 2.9 per cent decline in  total customers’ deposits, which fell to N12.286 trillion in H1‘17 from N12.649 trillion at the end of December 2016.

Access Bank recorded the highest decline of N190 billion or 9.0 per cent, as its customers’ deposits dropped to N1.9 trillion in H1‘17 from N2.1 trillion as at December 2016. First Bank came next with a decline of N107 billion or 3.4 per cent in customers’ deposits to N2.99 trillion from N3.10 trillion. The customers’ deposits of UBA fell by N37 billion or 1.5 per cent to N2.45 trillion from N2.47 trillion, while GTBank fell by N20 billion or 1.0 per cent to N1.96 trillion from N1.99 trillion. Zenith Bank recorded a decline of N9 billion from N2.975 trillion to N2.984 trillion.
Fixed Deposit: Though total fixed deposit of the five banks fell slightly by N1 billion, two of the banks, GTBank and Zenith Bank recorded decline while the remaining three recorded increases.

Zenith Bank recorded decline of N61 billion or 11 per cent in its fixed deposit accounts which fell to N495 billion in H1‘17 from N556 billion at end of December 2017. GTBank on its part recorded fixed deposit decline of N35 billion or 8.5 per cent to N375 billion from N410 billion in the review period.

UBA, however, was able to increase its fixed deposit by N48 billion or 9.0 per cent to N576 billion in H1‘17 from N528 billion as at December 2016. Similarly, Access Bank increased its Fixed Deposit by N35 billion or 3.8 per cent to N961 billion from N926 billion in the same period. First Bank also increased its fixed deposit by N12 billion or 1.4 per cent to N854 billion from N842 billion.

Current Account Deposit

The current account deposits of the five banks dropped by N368 billion to N5.046 trillion in H1‘17 from N5.414 trillion as at December 2016. Three of the banks namely Access Bank, First Bank and UBA recorded decline while Zenith and GTB recorded increase in their current account deposit. The current account deposits of Access Bank dropped by N233 billion or 24 per cent to N751 billion in H1‘17 from N984 billion as at December 2016.

Similarly, the current account deposit of UBA dropped by N107 billion or 9.7 per cent to N1.001 trillion from N1.109 trillion in the review period. First Bank also recorded decline of N47 billion or 6.3 per cent in its current account which fell to N688 billion from N735 billion in the review period.
GTBank, however, recorded increase of N15 billion or 1.3 per cent in its current account which rose to N1.138 trillion in H1‘17 from N1.123 trillion at the end of December 2016. Zenith Bank also recorded marginal increase of N5 billion or 0.3 per cent in current account to N1.468 trillion from N1.463 trillion.

Savings Deposit
The Savings deposit of the five banks collectively grew by N46 billion or 1.9 per cent to N2.517 trillion in H1‘17 from N2.471 trillion as at December 2016. Three banks, Access Bank, First Bank and UBA were responsible for the growth, while GTBank and Zenith Bank recorded decline in their savings deposits.

UBA recorded the highest increase of N29 billion or 5.5 per cent in savings deposit, which rose to N552 billion in H1‘17 from N523 billion as at December 2016. First Bank came second with N19 billion or 2.0 per cent growth in its savings deposit to N972 billion from N953 billion while Access Bank grew its Savings deposit by N9 billion or 5.0 per cent.
Zenith Bank recorded the highest decline in savings deposit of N8 billion or 2.2 per cent to N352 billion in H1‘17 from N360 billion as at December 2016. GTBank also recorded decline of N1 billion in its savings deposit to N453 billion from N454 billion in the review period.

Banks’ Response

Responding to Financial Vanguard inquiries on this development First Bank attributed the decline in its Term Deposit to the need to ensure appropriate deposit mix at optimum price. The Company stated: “Term deposit, however, increased marginally year-to-date at the Group level. Though, if we delineate the businesses in the Group, you will observe that term deposit at First Bank actually declined. This is in line with our focus of ensuring an appropriate deposit mix at an optimum price. “Notwithstanding, given the nature of other wholesale businesses in the Group, there was a marginal increase in term deposit in the period, albeit at competitive rates.

“The growth in savings account reflects the strength of our strong retail franchise and the ability to keep attracting a well-diversified funding base despite the difficult but improving market condition.”

Improving market condition

Access Bank on its part said the decline in its customers deposit was due to two factors: The improved foreign exchange liquidity as deposits accumulated for foreign exchange purchase in 2016 were utilized; and further monetary policy tightening measures by the CBN.

On its part, President, Bank Customers Association of Nigeria (BCAN), Mr. Uju Ogubunka, said that the decline in deposits was due to a combination of high interest rate, decline in customer income and increased awareness among bank customers on how to leverage on government securities to get maximum returns on their savings.

Speaking to Financial Vanguard, he said: “Many factors are responsible for this. Yes, treasury bills rate is one of them. People now move their money to TBs and other high yield instruments because they are also low risk investment. But this is also because there is no alternative investment option especially due to the economic situation hence the only way to maximise investments with low risk is TBs
“Another factor is that customers are getting more enlightened. Some of the enlightenment and educative programmes we are doing at BCAN are now yielding results. Before now some people didn’t even know they could move their funds to TBs. But now they know and they are acting on this knowledge.

“Also the decline in economic activities has reduced the income of consumers. People are not making income as they used to do. And you know that savings is a function of income. As a result, people are not leaving money in current account or savings account as they used to do. This is compounded by the fact that the high prices of goods and services make people to spend more money on same quantity of goods.”


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