However, Zenith Bank Plc reported 57 percent drop on interest expenses paid on customers’ deposits, from N127.01 billion reported in nine months of 2017 to N54.05 billion in the period under review. The Tier-1 lender attributed it to low yield on government securities.
Other Tier-1 banks reported double-digit growth on interest expenses on customers deposit while most of the Tier-2 banks reported marginal increase.
For instance, United Bank for Africa Plc (UBA) reported 44 per cent increase on interest expenses on customers’ deposits to N79.11 billion in nine months of 2018 from N54.88 billion reported in nine months of 2017.
Guaranty Trust Bank Plc (GTBank) reported N53.9 billion interest expenses on customers deposits up from N44.14 billion reported in nine months of 2017 while FBN Holdings reported 19 per cent increase on interest expenses paid on serving customers deposits to N83.04 billion from N69.89 billion.
Similarly, Ecobank Transnational Incorporated (ETI) reported N86.5 billion on interest expenses on customers’ deposits, 16 percent above N74.56 billion reported in nine months of 2017.
In addition, Access Bank Plc reported N94.74 billion on interest expenses on customers’ deposits in nine months of 2018 from N79.9 billion reported in nine months of 2017.
Also, Diamond Bank, a strong Tier-2 bank reported 42 percent increase on interest expenses to N28.2 billion from N19.88 billion while Wema Bank’s interest expenses on customers’ deposits moved up from N18.9 billion to N20.25 billion.
Union Bank’s expenses on customers’ deposits stood at N35.23 billion, up from N32.8 billion in nine months of 2017.
Furthermore, Fidelity Bank Plc reported one per cent increase on interest expenses on customers deposit to N45.4 billion from N44.88 billion while FCMB Group Plc announced two per cent on interest expenses on customers deposit from N28.94 billion in nine months of 2018 to N28.44 billion reported in nine months of 2017.
For the period under review, the banks reported increase in deposits from customers as most funds were channelled by customers for invest in government Treasury Bills ( T-Bills) despite the low yield.
Finance experts attributed the growth in interest expenses to fluctuations in foreign exchange rates as lenders which borrowed foreign loans had to repay in hard currency.
“Most of Tier- 1 banks that borrowed foreign loans had to pay interest and it affected their interest expenses. Besides, drop in the foreign exchange rates also increased their interest expenses generally,” said Mr. David Adnori.
The Managing Director and Chief Executive Officer of Lagos-based dealing firm, Highcap Securities Limited, added: “In a move to encourage deposits, banks increased interest expenses on fixed deposit to attract customers and boost their working capital.”
Also commenting, Managing Director, Cowry Assets Management Plc, Mr. Johnson Chukwu, said, the Central Bank of Nigeria (CBN) and federal government borrowing interest on T-Bills continued to attract investors’ interest, forcing banks to respond with increased interest on deposits to sustain liquidity position.
Analysts at InvestmentOne had noted in a report that, “Going into H2 2018, we are of the opinion that loan growth would come in muted as we expect a slight uptick in fixed income yields, which would further shift the focus of banks from expanding their loan books to investing more in fixed income securities so as to limit their exposure to credit risk even amidst a potential uptick in system liquidity as electioneering comes into play.”
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