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Banks’ Fees and Commission Income Rises 18.64% to N571.15bn in Q3

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Nigeria’s leading banks are trying to beat the heat out of interest rate and overcome a harsh regulatory environment with higher fee income.

Fees and commission income for the largest lenders rose by 18.64 percent to N571.17 billion in nine months of 2022 from N481.39 billion in the corresponding period of 2021, according to data gathered by MoneyCentral.

Drilling down the numbers shows they collectively generated N224.49 billion from fees on electronic products, which is 16.29 percent higher than 2021’s N193.02 billion.

Additionally, they realised N101.74 billion in account maintenance fees and N122.54 billion from credit fees commission.

Analysts attribute the growth in fees income to the rise in the price of goods and services and inflationary pressures.

Fee income represents the income earned on services provided by the bank like demand drafts, telegraphic transfers, issuance of guarantees, brokerage or commission earned on forex transactions, distribution of third party products like mutual funds, insurance and financial advisory services.

On January 1, 2020, the apex bank ushered in a new regime for bank charges. The changes to its guidelines mostly affected things like card maintenance fees, charges for hardware tokens, and the amount that can be paid for electronic transfers.

In a circular dated December 20, 2019, the CBN placed N2,500 as the maximum cost for a hardware token.

It also said that bills payment including bills payments through other e-channels should cost a maximum of N500, and gave a range of costs for electronic funds transfer.

“Card maintenance fee on current account has been removed as the accounts already attract account maintenance fee. Savings accounts will now attract a card maintenance fee of N50 per quarter from N50 per month,” the central bank said.

Zenith Bank’s fees and commission income increased by 50.33 percent to N100.05 billion in September 2021 from N78.29 billion as at September 2021.

Guaranty Trust Holding Company (GTCO) fees and commission income rose by 12.49 percent to N58.30 billion in September 2022 from N51.83 billion the previous year.

United Bank for Africa (UBA)’s fees and commission income increased by 55.45 percent to N67.91 billion as at September 2021.

Access Bank’s fees and commission income grew by 7.29 percent to N95.18 billion in the period under review from N88.71 billion the previous year.

First Bank Holdings Plc fees and commission income was up 5.94 percent to N90.99 billion in September 2022 from N85.89 billion the previous year.

Stanbic IBTC Holdings Plc fees and commission income grew by 12.31 percent to N68.45 billion in the period under review from N60.65 billion the previous year.

Since the interest rate environment is unpredictable, banks have resorted to intensifying their digital banking strategy to earn sizable income to bolster revenue amid a harsh regulatory environment.

Zenith Bank recorded a strong growth on all digital channels, resulting in a 44.5% growth in income on electronic products. The number of electronic product transactions increased by 22.50 percent to 1.12 billion as at June 2022 from 908 million the previous year.

However, lenders are in stiff competition with telco firms who have been given license by the central bank to operate as payment service banks (PSB).

Already, fintech standalone companies are cannibalizing the sales of banks, taking advantage of the proliferation of smartphones and a growing young population to stamp their footprint in Nigeria.

Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million, according to global research firm McKinsey and Company

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