Nigerian biggest banks ride on digital services to grow non-interest income

April 18, 2022 Mary

Nigerian largest banks are raking in profits from information and communications technology (IT) as the industry is increasingly reliant on emerging digital technologies to attract and retain customers.

Total income from the electronic businesses of Nigeria’s four largest banks rose to over N189.43 billion in 2021, up from N139.19 billion recorded in 2020, according to data compiled by BusinessDay.

Financial institutions are using financial technology products to boost efficiency of operations and enhance customer satisfaction through the introduction of applications that ensures transactions are carried out expeditiously.

Of course, these investments are paying off as lenders have recorded a remarkable growth in electronic business commission and fees which invariably increases their non-interest income.

The non-interest income is the revenue income generated from the non-core activities by the banks and financial institutions through Automated Teller Machines, USSD, Internet banking, Point of Sale payments and agency banking.

BusinessDay analysis ranks the five largest Nigerian banks ( FUGAZ, known as the tier-1 banks) excluding First Bank of Nigeria Holdings who is yet to release its full-year 2021 financial year report, according to their e-banking income as a percentage of non-interest income.

United Bank for Africa (UBA)

BusinessDay analysis shows that UBA ranked first by having its e-banking income make up one over half( 51 percent) of its non-interest income in 2021. In 2020 and 2019, the bank recorded 30.82 percent and 31.16 percent in E-banking as a percentage of non-interest income.

The Bank has continued to see an increase in its E-banking income over the past five years. Although, holistically looking at the E-banking revenue, the bank ranked second as it recorded N64.59 billion in 2021, N44.25 billion in 2020 and N36 billion in 2019.

Africa’s global bank, UBA, recorded N126.28 billion as non-interest income in 2021, N143.58 billion in 2020 and N124.42 billion in 2019.

Net fees and commission income stood at N101 billion in December 2021, a 22 percent increase from N82.61 billion in December 2020. While it stood at N80 billion in 2019, an increase from N65.4 billion in 2018.

Access Bank

Access Bank ranked second as its E-banking income as a percentage of non-interest income stood at 23.41 percent in 2021. This however is a huge decline by 76.6 percent from the previous year when its E-banking income was 42.99 percent of its non-interest revenue. While in 2019, its E-banking income was 78.34 percent of its non-interest income, the highest in 5 years.

Access Bank however, topped the list in 2021 as it recorded N66.28 billion in its E-banking revenue, an increase from N56.09 billion recorded the previous year.

In 2019, the bank recorded N36.04 billion, compared to N14.16 billion recorded in 2018.

Its non-interest income surged by 116 percent to N283.1 billion in 2021, from N130.5 billion in 2020. The bank recorded N46 billion and N41.9 billion in 2019 and 2018 respectively.

Access bank grew net fees and commission income to N118.6 billion in 2021, from N93.6 billion in 2020. This is compared to N74.05 billion recorded in 2019 and N52.5 billion in 2018.

GTCO

Guaranty Trust Holding Company Plc’s E-banking income was 12.23 percent of its non-interest income in 2021, compared to 2020 when there was a decline to 7.94 percent from 11.51 percent in 2019.

Although GTCO has the least generated E-banking revenue amongst the largest banks in 2021 with N21.08 billion. In 2020, the bank generated N11.8 billion, a decline from 2019 when N15.7 billion was recorded.

Non-interest income grew in 2021 to N172.44 billion in 2021 from N148.2 billion in 2020. It recorded N136.1 billion, N125.8 billion and N89 billion in 2019, 2018 and 2017 respectively.

The bank explained that the non-interest income growth resulted largely from 39.4 percent growth in fees and commission income, 9.9 percent increase in other income, which was partly offset by 8.6 percent decrease in net trading gains.

Net fees and commission income grew to N65.75 billion in 2021 from N46.9 billion in 2020. In 2019, the bank recorded N59.4 billion compared to N50.5 billion in 2018.

Zenith Bank

Zenith Bank recorded the least among the comparable tier-1 banks with its non-interest income consisting of only 12.12 percent, a slight increase from 10.76 percent in 2020, however this was a decline from 2018, when its e-banking income was 18.31 percent, the highest in five years.

The most capitalised bank’s E-banking income stood at N37.5 billion in 2021 from N27.1 billion the previous year. In 2019, the bank recorded N42.5 billion, the highest in five years, an increase from 2018 when N20.42 billion was recorded.

Its non-interest income stood at N30.9 billion in 2021 compared to N25.2 billion in the past year. In 2019, the bank recorded an increase to N23.2 billion from N17.9 billion in 2018.

First Bank of Nigeria Holdings

Due to the absence of a full-year report, First Bank’s 2021 nine-month financials showed E-banking income was 28.13 percent of its non-interest income.

Analysis of its full-year 2020 report showed E-banking income was 27.86 percent of its non-interest income, a decline from 2019 when it was 32.94 percent.

First Bank earned N42 billion as e-banking income in the first nine months of 2021 while it earned N48.7 billion in the full year 2020.

In the full-year 2019, the bank recorded N48 billion an increase from 2018 when N34 billion was recorded.

The bank’s non-interest income in the first nine months of 2021 was N149.4 billion. In the full year 2020, First Bank recorded N174.7 billion, an increase from N145.8 billion in the previous year.

Net fees and commission income stood at N85.9 billion as at September, 2021. In the full year 2020, First bank earned N93.78 billion compared to N82.9 billion in 2019 while it earned N75.4 billion in 2018.

Although the steady increase in e-banking revenue is beneficial for banks, customers embrace any innovation that makes financial transactions simple and convenient. Many customers have continued to complain about the charges associated with their transactions, which may lead them to seek cheaper options.

It is important to note that the high charges would limit the progress of financial inclusion as customers will avoid operating a bank account. It has been established by several surveys that customers are very sensitive to charges, Ayodeji Ebo, an investment professional, notes.

In the short to medium term, low transaction fees will be a major selling factor for banks, as customers will migrate to banks with the lowest charges.