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PROSHARE | |
PROSHARE |
Wednesday,
March 18, 2020/ 08:47PM/ Proshare Research / Header Image Credit: Proshare Research a
As back room discussions
continue between banks over mergers and acquisitions, the issues of operating efficiency
and cost reduction have become hot button topics. The consequences of the
recent Coronavirus outbreak have made the search for efficiency even more pressing
as banks review growth strategies for 2020.
Despite the fact that
most banks listed on the Nigerian Stock Exchange (NSE) have not released their
financial year-end (FYE) 2019 results, interim numbers show that the banks are
in a race for costs efficiency as the domestic economy tightens and operating
margins get chiselled down.
Information as regards
2019-year end cost-to-income ratio was available for only five (5) banks amongst
the thirteen (13) banks listed on the NSE. Seven (7) banks had indicative cost-to-income
ratio for Q3 2019 results while Wema Bank had ratios for Q2 2019 (see
table 1 below).
Table 1: Banks cost-to-income
ratio 2017-2019
SN |
Banks |
FY 2019 |
FY 2018 |
FY 2017 |
1 |
36.11 |
37.09 |
38.89 |
|
2 |
66.4* |
61.5 |
61.8 |
|
3 |
48.8 |
49.3 |
52.8 |
|
4 |
50.4 |
52.9 |
49.8 |
|
5 |
61.9 |
62.2 |
61.9 |
|
6 |
71.5* |
44.4 |
39.7 |
|
7 |
78.8* |
44.6 |
40.9 |
|
8 |
60.8* |
64 |
57.8 |
|
9 |
74.1 |
79.2 |
61.5 |
|
10 |
71.7* |
71.1 |
68.6 |
|
11 |
82.3* |
43.9 |
71.5 |
|
12 |
86* |
54.2 |
27.2 |
|
13 |
86.03** |
87.16 |
89.9 |
Source: Banks investors reports, Proshare Research
Data with
Asterisk *Are as at Q3 2019
Data with Asterisk
**Are as at Q2 2019
The Hard
Dash For Cheap Cash
GT Bank and UBN were the
two banks that reported the lowest cost-to-income ratio so far for the year
ended December 2019, they recorded cost-to-income ratios of 36.11% and 42.6%
respectively. While Unity Bank, Sterling Bank and FCMB were the three banks
with the highest cost-to-income ratio for Q3 2019 as they reported cost-to-income
ratios of 86%, 82.3% and 78.8% respectively (see Table 1 below).
All seven-banks that
reported cost-to-income ratio in Q3 had cost-to-income ratios above 60%. This
indicates clearly that the majority of banks listed on the NSE recorded high
expense costs relative to incomes in the Q3 2019 (see Chart 1 below).
Chart
1: Banks cost-to-income
ratio 2017-Q3 2019
Source: Banks
investors reports, Proshare Research
Over the past three years
GT Bank, Zenith Bank, and UBN have consistently reported low CIR relative to
other banks, with GT Bank consistently recording the lowest CIR among the three
big money centre institutions. GT Bank recorded a decline in its CIR to 36.11%
in 2019 from 37.09% in 2018 which was as a result of repricing of time
deposits, sustained low cost deposit mix, continuous customer acquisition drive
and a retail strategy anchored on focused digital solutions to support a low
cost deposit drive.
Zenith Bank recorded a
decline in its CIR to 48.8% in 2019 from 49.3% in 2018, part of the strategy it
adopted was effective deposit mobilization at the retail end of the market to
lend to corporate clients, leveraging the bank's strong digital platform and emerging
technologies (see Chart 2 below).
Chart
2: GT Bank and Zenith Bank
Cost-to-income ratio 2017-2019
Source: Banks investors reports, Proshare Research
Pulling Out
The Stops
With the looming
Coronavirus pandemic banks will see business volumes collapse as manufacturers
and traders alike find their businesses orphaned by low or non-existent demand.
The reverberations in the banking halls of the declining economic fortunes in
Q2 2020 may become the herald of a new business era. Banks with strategic intent
may require a comprehensive cost containment and business growth and recovery
plan. They may need to pull out all the
stops now.
Related News On Banking Sector
1.
ACCESS
Declares N97.5bn PAT in 2019 Audited Results, Proposes N0.40k Final Div.
(SP:N8.50k)
2.
UBN
Declares N19.9bn PAT in 2019 Audited Results Proposes N0.25k Final Div.
(SP:N6.85K)
3.
STANBIC
Declares N75.04bn PAT in 2019 Audited Results, Proposes N2 Final
Dividend,(SP:N32.50K)
4.
GUARANTY Declares N196.8bn PAT in 2019 Audited Results,
Proposes N2.50k Final Div. (SP:N23.80k)
5.
UBA Declares N89.09bn PAT in 2019 Audited Results;
Proposes 80k Final Dividend,(SP:N6.70k)
6.
ZENITHBANK Declares N208bn PAT in 2019 Audited Results;
Proposes N2.50k Final Div. (SP:N19.40K)
7.
FCMB Declares N17.7bn PAT in 2019 Unaudited
Results,(SP:N1.90k)
8.
FIDELITYBK
declares N29.5bn PAT in Q4 2019 Results; (SP:N2.11k)
9.
WEMABANK
Declares N4.4bn PAT in 2019 Q4 Unaudited Results
10. FBNH Declares N61.95bn PAT in Unaudited Q4 2019 Results,
(SP:N6.95k)
11.
The GTBank 2020 Economic Outlook: Macro-Economic and
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14. Nigerian
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Bank 9Months 2019 Result; Strong Earnings, But OPEX Rises 47.7%
20. GT Bank 9M 2019; Good
Numbers, But A Howler In Loan Asset Growth
21. Unity Bank Plc Q3 2019
Results: Pulling Out of A Ditch Slowly
22. Banks' H1 2019 Numbers:
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