Nigerian largest banks have incurred N211.63 billion in resolution costs in the nine months to September 2021, according to data gathered by MoneyCentral.
That compares with N172.36 billion incurred in 2020 (a 22.78 percent increase) as the Asset Management Corporation of Nigeria (AMCON) charge continues to form the large chunk of expense in the income statement of lenders who are reeling from a punitive regulatory environment.
Nigerian Banks are required to contribute an equivalent of 0.5% of its total assets and contingent assets as at the preceding year end to AMCON’s sinking fund in line with existing guidelines. It is non-refundable and does not represent any ownership interest.
This represents accrual for Banking Resolution Fund Levy in accordance with provisions of sections 74 and 77 of the Banks and Other Financial Institutions Act 2020.
While Zenith Bank, Access Bank, United Bank for Africa, Guaranty Trust Holdings, and FirstBank Holdings have a combined AMCON charge of N175.03 billion, Tier 2 lenders such as First City Monument Bank, Sterling Bank, Union Bank, and Wema have a combined resolution cost of N25.09 billion.
The disparity stems from the significant difference in asset sizes of the two categories of lenders as the big ones have much bigger loans and deposits.
The five big banks have a combined total asset of N41.13 trillion as at September 2021, and that compares with the N9.70 trillion, according to data gathered by MoneyCentral.
Analysts say profit would have been magnified without resolution charge and that subjecting lenders to such charges amid a low yield environment and central bank dovish stance is a downside risk to the industry.
Analysis by MoneyCentral shows AMCON charges make up 23.07 percent of total operating expenses of banks as at September 2021.
Zenith Bank, the largest lender by market capitalisation saw a 22.53 percent increase in resolution costs to N37.92 billion in September 2021 from N30.94 billion the previous year.
Access Bank’s AMCON charge was up 17.14 percent to N41.50 billion in the period under review from N35.43 billion the previous year.
GTCO’s AMCON charge was up 27.26 percent to N21.88 billion in September 2021 from N17.20 billion as at September 2020.
United Bank for Africa (UBA)’s AMCON charge increased by 24.11 percent to N27.82 billion as at September 2021 from N22.41 billion as at September 2020.
FirstBank Holdings’ resolution charge was up 35.89 percent to N45.89 billion in September 2021 from N33.77 billion as at September 2020.