10 Bank interest income up 19.4% driven by high yield environment, loans and advances
Following the increase in high-yield business, personal and environmental lending, a total of 10 commercial banks reported a 19.4% increase in interest income generated from loans and advances to customers in 2021.
Analysis of the audited report of banks for the period ended December 32, 2021 indicated that the 10 banks generated interest income of N1.99 trillion on loans and advances in 2021, compared to N1.66 trillion. naira declared in 2020.
The banks are: Access Bank Plc, Guaranty Trust Holdings Company (GTCO) Plc, United Bank for Africa (UBA) Plc, Zenith Bank Plc, Fidelity Bank Plc and Sterling Bank Plc.
Others include: FCMB Group Plc, Stanbic IBTC Holdings Plc, Union Bank of Nigeria and Ecobank Transnational Incorporated (ETI).
In recent years, stronger Nigerian banks, with an increase in loans and advances to customers, are reaping interest income from business and personal loans.
For example, Access Bank in its 2021 audited report generated N370.82 billion in loan interest income, an increase of 19.80% from N309.5 billion in 2020, while UBA’s interest income from loans to clients increased by 11.93% to 251 naira. 0.9 billion in 2021 compared to 225.04 billion naira reported in 2020.
In addition, Zenith Bank increased its interest income from customer loans to N292.2 billion in 2021 from N250.8 billion in 2020, while GTCO’s interest income from customer loans closed the 2021 financial year at N194.3 billion, an increase of 5.48 percent. cent of 184.18 billion naira in 2020.
This comes as the Central Bank of Nigeria (CBN) maintains its monetary policy rate (MPR) at 11.5% in 2021.
As collected by THISDAY, the average prime rates and maximum lending rates were 11.48% and 28.06% in 2021, respectively.
CBN data on bank lending interest rates showed a 0.72 percentage point drop in the maximum lending rate to 27.58% in December from January 28.3, 2021.
On the contrary, the average prime rate increased by 0.43 percentage points to stand at 11.68% in December, compared to 11.25% in January 2021.
According to the report, in 2021 banks were charging an average interest rate of between 4% and 36% on loans extended to customers in various sectors of the economy, particularly agriculture and forestry, manufacturing and education.
This is -7.5 percentage points lower and 24.50 basis points higher than 11.50% TPM.
According to the Banking System Stability Review Report (BSSRR), presented by the CBN, the operating cost to income ratio of banks fell from 68.2% in 2020 to 73.1% in 2021, under the effect of rising inflation and rising AMCON fees.
A breakdown of commercial bank lending rates as published by the CBN in 2021 shows two different classes of loan pricing, which are prime lending rates, charged creditworthy customers and maximum lending rates, charged to risky customers. perceived.
The applicable rates for each of the commercial banks as of April 9, 2021 showed that Stanbic IBTC Bank charged the lowest rate on loans at 4%, followed by GTCO at 5%. Fidelity Bank charged 6%, UBA 7% and Wema Bank 9%.
Banks that charge higher fees in the preferential lending category include ETI, 23% and UBA, 20%.
Analysts expressed that commercial banks may revise the lending rate, which some have adopted by lending at a single interest rate to individual customers to comply with the CBN’s LDR policy.
Commenting, analyst at PAC Holdings, Mr Wole Adeyeye said: “Banks are going to face challenges in terms of interest income generated from loans to customers. Licensing of PSP to MTN Nigeria and Airtel Africa is going to be a threat but banks with effective management understand that banks have faced Fintech companies and tried to improve lending to customers through App USSD , among other devices.
For his part, Vice Chairman of Highcap Securities Limited, Mr. David Adnori, said bank customers need to decide where to borrow with the alternatives provided by Fintech and PSP operators.
He argued that banks are always cautious in managing interest income generated from loans and customers and should thrive amid challenges posed by Fintech companies, among others.
However, the Vetiva Research analyst believes that tough times still lie ahead for banks, with interest rates poised to slowly recover, while inflationary pressures persist.
Analysts added that competition from new Payment Service Bank (PSB) licenses issued to MTN Nigeria and Airtel poses a threat to some of the banks’ businesses.
“Next year, we expect interest rates to remain on a steady upward trajectory, as government borrowing continues to rise to finance a steadily rising deficit. However, we expect the “Inflation continues to outpace this rise, which means negative real returns for investors in the market,” said Vetiva banking analyst Joshua Odebisi.