Eleven largest banks in Africa’s largest economy incurred a cumulative interest expense of N556.20 billion as at June 2018, which represents a 7.75 percent increase from the N516.07 billion recorded the previous year.
Intense competition for deposits among banks and other financial institutions and continued customer appetite for treasury bills are responsible for growth in interest expense.
The Banks are: First Bank Holdings Plc, Access Bank Nigeria Plc, United Bank for Africa (UBA) Plc, Zenith Bank Plc, Guaranty Trust Bank (GTBank), Fidelity Bank Plc, Stanbic IBTC Holdings Plc, Sterling Bank Plc, First City Monument Bank Plc, Diamond Bank Nigeria Plc, and Union Bank Nigeria Plc.
A breakdown of the cumulative figure shows GTBank’s interest expense increase by 20.91 percent to N43.95 billion in June 2018 from N36.34 billion the previous year.
The largest lender by market value said that improved low cost mix of 83.4 percent helped curtail interest expense growth and helped moderate 60 bps rise in Cost of Fund from 2.5 percent in June 2018 in H1-2017 to 3.1 percent the previous year.
FirstBank Holdings’ interest expenses were up 10.93 percent to N75.76 billion in the period under review, from N68.29 billion the previous year.
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Zenith Bank’s interest expense however dropped by 39.41 percent to N74.71 billion in the period under review from N123.29 billion the previous year. Cost of Funds decreased from 6.4 percent recorded in June 2017 to 3.4 percent as at June of 2018 as the bank continues to focus on its drive for low cost deposit mix.
Access Bank’s interest expense increased by 28.56 percent to N101.38 billion in June 2018 from N78.86 billion as June 2017.The lender said Cost of Funds remained stable q/q at 5.8 percentin Jun’18.
“The Bank continues its retail drive to significantly improve its deposit structure to bring funding costs lower,” said the lender.
UBA’s interest expense grew increased by 42.22 percent to N76.21 billion in the period under review from N53.57 billion the previous year.
Fidelity Bank’s interest expense was up 10.05 percent to N41.98 billion in the period under review from N38.15 billion as at June 2017.
The increase in interest expense can be attributed largely to a marked increase in the interest paid on debts issued as well as other borrowed funds (+64%y/y), according to analysts at CSL Stock Brokers Ltd in a recent note to clients.
“Consequently, net interest income declined by 6% y/y in H1 2018 to N30.9bn (H1 2017; N32.9bn) coming in below our 2018 estimate of N65.4bn on an annualised basis,” said analysts at CSL Stock Brokers.
BALA AUGIE
