As competitionand regulatory influence continues to excerpt pressure on bank balance sheet and net positions, most Nigerian banks are already looking towards non-traditional alternativeincome source to boost their bottom lines.
Traditional income source of Net Interest Income is already thinning out and being replaced by a more dynamic and innovative Fee and Commission Income. For banks like Zenith, FBN, UBA, GT, Fidelity, Union, Stanbic and Unity Bank. Fee and Commission Income might as well be the comforter for their half year 2019 financials as their Interest income drops were compensated by growth in Fee Income.
Net Interest Income is the difference in Income from Interest collected on Customer Loans and the Interest paid on Customer Deposits (Term/Fixed Deposit and Savings Account).
READ ALSO: How to be a good bank witness in court
Loans are Risk Assets that repayment of Principal and Interest are often affected by economic factors outside of the banks’ influence. Big ticket loans have helped to jeopardize banks’ profit in recent past because of provisioning and bad loan write-offs. Banks are therefore wary of who they lend to, especially in an economy with macro-economic uncertainties like ours.
Interest on Customers Deposit on the other hand is growing as banks must continue to lure customers with higher Interest Rates to maintain deposit growth. More and more bank customers are also becoming knowledgeable about alternative investment options available to them in Government Securities and FinTech companies.
READ ALSO: How to handle bank robbery situation
Competitionamong banks for customers patronage has also help ensure interest rates on Loansand Interest on Deposits are kept at competitive rates. Good for bank customersand the economy though, but it is helping to ensure Net Interest Income thins-out.
Fee and Commission Income on the other hand are Fee Income the bank realises from Account Management, Loan (Management, Commitment and Processing Fees), Electronic banking products, Contingent Liability products (Bonds & Guarantee), Financial advisory services and other Fee charges.
Fee and Commission Incomes are dynamic, and banks are exploring all avenues to maintain bottom line growth with this income source.
Of the 12 banks that have released their half year 2019 financial result to the public, only 4 banks (Access, FCMB, Sterling, and Wema) grew their Interest Income in H1 2019 when compared to H1 2018.
Access Bank, Nigeria’s biggest financial Institution in Asset base, Customer deposit and Loan to customer led with a 69.9% growth while the other 3 banks had 3.4%, 4.9% and 2.8% for FCMB, Sterling and Wema bank respectively. The other 8 banks had drops in Interest Income.
All the 12banks had growth in Fee and Commission Income except Stanbic IBTC bank with amarginal drop of less than 1%.
The Tier 1banks seem to be growing Fee Income faster than other banks as Zenith Bank tookthe lead in H1 2019 Fee and Commission Income growth with a 14% growth over H12018 figures. Followed by GTBank, Access, FBN and UBA with 7.9%, 7.41%, 5.3%and 5.3% respectively.
Of the 6other banks Sterling bank had a growth of 2.9% followed by the Fidelity, Union, Wema, FCMB and Unity bankwith H1 2019 Fee and Commission Income growth of 2.5%, 0.8%, 0.7%, 0.2% and0.1% respectively