UBA, Zenith Bank, others hit N463.68bn in non-interest income

Not less than 10 Deposit Money Banks (DMBs) operating in the country have reported total sum of N463.68billion in non-interest income amid Foreign Exchange (FX) income, weak revaluation gain on FX income and transaction fees.

The affected banks in half year of 2017 reported an increase of N18.37 billion or 4.1 per cent increase in non-interest income from N445.31 billion in six months of 2016.
Financial institutions non-interest income are generated primarily from fees including deposit, transaction fees and FX revaluation gains with the likes of Guaranty Trust Bank Plc (GTBank) reporting a significant drop of about 90 per cent in FX revaluation gain.

According to DAILY TIMES findings, the likes of Access Bank Plc, Zenith Bank Plc, United Bank for Africa Plc, and Diamond Bank Plc benefitted from FX income that comprises of trading income on foreign currencies as well as gains from revaluation of trading position.

For Instance, Access Bank’s for the six months of 2017 reported N84.4bn in non-interest income as against N61.7bn reported in six months of 2016.
The Bank attributed the growth to strong year on year (y/y) increase in net trading income of N55.4bn (+152 per cent y/y) driven by increase in the Bank’s foreign exchange income resulting from trading activities.

For Zenith Bank, Non-Interest income moved from N33.04bn to N118.18bn, while United Bank for Africa‘s non-interest income gained 16 per cent to N60.39bn in six months of 2017 from N52.06bn in six months of 2016.

United Bank for Africa in a statement said, the bank recorded double digit growth in Non-interest income, contributing some 30 per cent of gross earnings, as increased foreign currency liquidity enhanced FX trading income.

In addition, Diamond Bank’s non-interest income rose by 23.4 per cent to N61.7bn from N50bn in prior six months of 2016; and Wema Bank Plc’s non-interest income increased by 22 per cent to N5.01bn from N4.11bn in six months of 2016.

The MD/CEO, Wema Bank, Mr. Segun Oloketuyi said, “Despite the relatively tough climate, Wema Bank recorded success on a number of financial and non-financial priorities.

Specifically, Gross Earnings recorded stable growth, increasing by 25.17 per cent from N24.26bn (H1’2016) to N30.37bn (H1’2017).

This growth resulted from a 25.84per cent increase in interest income to N25.37bn and a 21.92per cent rise in non-interest income where we continue to see impressive growth, led by income from our mobile and digital banking offerings.”

With the likes of GTBank, Fidelity Bank Plc, First Bank of Nigeria Holdings Plc, Sterling Bank Plc and Union Bank of Nigeria Plc, reporting drop in non-interest income, analysts said macro economic challenges impacted negatively on trading activities of banks.

However, GTBank’s non-Interest Income dropped by 51.8 per cent to N48.2bn from N100.1bn due to decline in foreign exchange income (FX revaluation gains).

Also, First City Monument Bank (FCMB) Group Plc reported, non-interest income of N12.8bn, for the six months ended June 2017, a decrease of 51 per cent year-on-year, from N26bn for the same period prior year, primarily due to the non-recurrence of foreign exchange revaluation gains.

Other banks that reported decline in non-interest income include FBN Holdings Plc, Sterling Bank Plc and Union Bank of Nigeria Plc
Of the four banks, FBN Holdings non-interest income dropped by 46 per cent to N50.5bn from N94.1bn in six months of 2016; while Sterling Bank’s non-interest income slump by 16.5 per cent from N8.5bn to N7.1bn in six months of 2017.

With a marginal drop of 1.9 per cent, Union Bank of Nigeria reported N15.4bn in non-interest income from N15.7bn in prior six months of 2016.

Meanwhile, four Nigerian banks are operating with too many non-performing loans on their books and with liquidity ratios below the minimum requirement, two members of the central bank monetary policy committee said in statements on the bank’s website.

They did not name the lenders, but said the four banks, together, were equivalent to at least one systemically important bank, policy-setter, Doyin Salami said in his statement, published late on Tuesday.

Financial sector stress tests showed capital adequacy ratios for the industry in Nigeria worsened to 11.51 per cent in June, from 12.81 per cent in April, as against a regulatory minimum of 15 per cent for lenders with international licenses.

“The financial performance indicators showed that when the four outlier banks were removed, capital adequacy, (NPLs) non-performing loan ratio, as well as liquidity ratio are all above the prudential requirement,” another member, Balami Dahiru Hassan, said.

NPLs stood at 15.07 per cent in June compared with five per cent regulatory limit. Salami said the ratio stood at 8.17 percent when excluding the four lenders in question.

The IMF has urged Nigerian authorities to quickly increase the capital of undercapitalized banks and putting a time limit on regulatory forbearance after it said last month that four lenders were under-capitalised.

Nigeria’s Union Bank, on Wednesday, started a N50bn share sale to existing shareholders to enhance its regulatory and working capital.