Banks Defy Stiff Competition from Fintechs, Grow Deposits by 63% to N115tn

Kayode Tokede

Despite fierce competition from Fintechs, individuals and institutions are increasingly entrusting their funds into the safekeeping and management of Nigerian banks as total deposits in the banking sector increased to N115 trillion in 2023 financial year, about 63 per cent growth from N70.5 trillion reported in 2022 financial year.

This is according to THISDAY analysis of the 3023 audited results of banks operating in Nigeria, which showed an aggressive increase in low-cost deposits amid severe challenges posed by Fintech companies. 

Nigerian banks have in the last few years faced fierce competition from Fintech companies such as; MoMo Payment Service Bank (MoMo PSB), Fintech subsidiary of MTN Nigeria. Airtel SmartCash, PiggyVest, Opay, Palmpay, among others that offer lucrative interest rate on deposits.   

As technology evolves, customer demands continue to affect how businesses operate especially in the banking sector.

In recent times, fintechs have raised the bar, offering customers easier, faster, and cheaper financial services particularly in areas such as zero transfer fees, more attractive interest rates on savings, full online banking experience, speed and simplicity.

The competitive advantage is endearing Fintechs to an increasing number of customers and strengthening their position in the industry.

With the emerges of more Fintechs, electronic payment transactions in Nigeria hit an all-time high in 2023 as it rose by 55 per cent to N600 trillion, compared to N387 trillion in 2022, according to Nigeria Inter-Bank Settlement System (NIBSS).

However, a data, provided to the Nigerian Exchange Limited (NGX) and others made available by industry association, showed impressive growths across all cadres and tiers of banks, with the middle tier and newly established banks competing well with the first generation and largest banks.

THISDAY analysis showed that Ecobank Transnational Incorporated (ETI) Plc and Access Holdings Plc, two Pan-African financial institutions, led the deposits chart last year- both banks have branch network in over 30 African countries.

ETI led the chart with over N20.52 trillion deposits in 2023, about 91 per cent increase from N10.73 trillion in 2022, while Access Holdings reported N19.76 trillion deposits in 2023, representing an increase of 76 per cent from N11.26 trillion declared in 2022 financial year.

Another pan-African financial institution, UBA declared N17.36 trillion customer deposits, a growth off 93 per cent from N8.99 trillion in 2022.  Zenith Bank’s deposits moved to N15.18 trillion in 2023, an increase of 69 per cent from N8.98 trillion reported in 2022.  

On its part, FCMB Group grew deposit by about 63 per cent from N2.07 trillion in 2022 to N3.4 trillion in 2023,

Further investigation by THISDAY revealed that Polaris Bank, an unlisted financial institution declared N1.09 trillion deposits in 2023, Premium Trust Bank, a national commercial bank which commenced operations in April 2022, grew deposit base by 382 per cent from N55 billion in December 2022 to N265 billion in December 2023.

A general review of the deposits by banks showed considerable cost management, with banks recording substantial increases in low-cost deposits.

Deposit is a key ratio to measure public confidence and popular participation in a financial services sector. It is the basic building block for a banking sector’s funding and liquidity. Deposit size, growth and structure are key analytical instruments for banks’ examiners and analysts.

Commenting, the CEO, Wyoming Capital and Partners, Mr. Tajudeen Olayinka stated that the increasing deposits in the banking sector is driven by industry competition and excess liquidity in the financial sector.

He noted that banks are beginning to explore other alternatives   to grow deposit in a move to remain relevant and lend to real sector. 

The Federal Reserve Board (FRB) described deposits as, “the primary funding source for most banks and, as a result, have a significant effect on a bank’s liquidity. Banks use deposits in a variety of ways, primarily to fund loans and investments.”

There is a correlational relationship between deposit and loans and expenses, and as such, national economic growth. A report by the Central Bank of Nigeria (CBN) had shown that Nigerian banks’ loans and supports for the private sector had increased by about N30 trillion over one-year period.

Latest data from the CBN indicated that credit to the private sector (CPS) rose by 65.9 per cent or N29.52 trillion to N74.31 trillion in May 2024 compared with N44.79 trillion recorded in comparable period of 2023.

The growth in lending and supports to the private sector underlined the resilient balance sheet of banks and banks’ response to the apex bank’s push for increased lending to bolster economic activities.

The CPS includes loans, trade credits and other account receivables and supports provided by banks to the private sector within a period.

A month-on-month breakdown showed sustained growth in lending over the past two months with additional credits of N1.39 trillion and N1.71 trillion in May and April 2024 respectively.

Banks’ lending and supports to the private sector rose from N71.21 trillion in March 2024 to N72.92 trillion in April and topped N74.31 trillion in May 2024, representing a month-on-month increase of 1.9 per cent and 2.4 per cent for May and April 2024 respectively.