18% MPR: 10 Banks Spent N542.8bn on Customers’ Deposits in Q1

Kayode Tokede 

With the Monetary Policy Rate (MPR) currently at 18 per cent, a total of 10 banks spent N542.8billion on customers’ deposits in first quarter   (Q1) ended March 31, 2023, an increase of 71.83 per cent from N315.91 billion reported in first quarter of 2022. 

The banks include; Guaranty Trust Holding Company (GTCO) Plc, Zenith Bank Plc, United Bank for Africa (UBA), Ecobank Transnational Incorporated (ETI), and Access Holdings Plc.

Others are:  Fidelity Bank Plc, Union Bank of Nigeria, Stanbic IBTC Holdings Plc, FCMB Holdings and Wema Bank Plc.

The Central Bank of Nigeria (CBN) at its second Monetary Policy Committee (MPC) in 2023 increased MPR to 18 per cent from 17.5 per cent in an aggressive push to contain the raising inflationary pressure in Nigeria.

In January, the MPC raised its benchmark lending rate from 16.5 per cent to 17.5 per cent in a sustained push to control inflation and ease pressure on the naira.

THISDAY analysis of the banks expenses on customers’ deposits and borrowings in Q1 2023 revealed that most Tier-1 banks reported high interest expenses on deposits from customers as interest rate on saving deposits moved from 4.29 per cent in January 2023 to 4.58 per cent in March 2023.

For instance, Zenith Bank reported N70.84billion interest expenses in Q1 2023, an increase of 174.11 per cent from N25.84billion reported in Q1 2022, while GTCO declared N21.93billion interest expenses in Q1 2023, an increase of 63.18per cent from N13.44billion in Q1 2022. 

The significant increase in GTCO interest expenses was primarily driven by the higher fees expensed on customer deposits that rose by 57.3per cent to N19.94 billion.

Likewise, costs of borrowings grew by 60.6 per cent to N1.03 billion in Q1 2023 and financial institutions deposits rose by 794.7per cent to N85.00 million, came in higher in the period under review.

On his part, UBA Plc posted N72.25 billion interest expenses in Q1 2023, representing 80 per cent increase from N40.21billion in Q1 2022, while Ecobank announced N84.59 billion interest expenses in Q1 2023 from N48.85 billion in Q1 2022. 

UBA’s Group Managing Director/ Chief Executive Officer, Mr. Oliver Alawuba explained that despite the high inflationary and challenging global environment, thee Pan-African bank was able to leverage the uptick in interest rates and improved digital offerings, in growing funded and non-funded income.

In addition, Access Holdings reported N158.94billion interest expenses in Q1 2023, a growth of 84 per cent from N86.33billion reported in Q1 2022.

In the period under review, the 10 banks generated N1.23 trillion interest income from loans & advances to customers, an increase of 44.5 per cent from N850.23billion reported in Q1 2022. 

Access Holdings, followed by ETI led other banks in interest income generated from loans & advances to customers, treasury bills, Government and other bonds, among others amid hike in MPR by CBN.

Access Holdings generated N254.22billion interest income in Q1 2023, an increase of 46.4 per cent from N173.7billion in Q1 2022,  while ETI reported N207.22billion interest income in Q1 2023,  a growth of 33 per cent from N156.113billion in Q1 2022.  

Finance analysts have maintained that the hike in MPR is expected to impact on businesses and banks do not operate in isolation.

The Director/Chief Executive Officer · Centre for the Promotion of Private Enterprise (CPPE), Mr Muda Yusuf explained that the victims of the continuous hike in the monetary policy rate are the investors in the real economy and other entrepreneurs in the economy.

According to him, “Increase of the MPR to 18 per cent means an additional burden on business as it will result in a spike in cost of credit. Interest rate on loans will increase, production costs would increase, sales will drop, profit margins will shrink and investors’ confidence will be negatively impacted. The reality is that ways and means financing, high energy cost, and foreign exchange challenges are much bigger factors in the inflation equation.”

He urged the CBN to pay greater attention to financial system stability at this time.

“Recent developments in the global financial system underscores the imperative of cautious interest rate hikes,” he explained.