Guaranty Trust Holding Company (GTCO) Plc is the most efficient bank in Nigeria as it has the lowest cost to income ratio among peer rivals even amid unfriendly regulatory environment, inflationary pressures, and regulatory induced cost.
GTCO has a cost to income ratio (CIR) of 42.28 percent as at December 2021, according to data gathered by MoneyCentral.
That compares with Zenith Bank, 50.80 percent; Access Bank, 58.80 percent; United Bank for Africa (UBA), 62.70 percent, and FBN Holdings Plc, 69.70 percent.
The cost-to-income ratio is one of the efficiency ratios used to gauge an organization’s efficiency. It is used to compare the operating expenses of a bank vis-à-vis its income. The lower the cost to income ratio, the better the company’s performance.
It must be noted that GTCO has been maintaining the top spot as the most cost-efficient lender for nearly a decade as it continues to intensify on digitalization and aggressive cost control measures.
For instance, because of the recent energy crisis (scarcity), the lender closed offices across the country at 1:30 pm.
However, the average cost to income ratio for five Nigerian banks- GTCO, Zenith Bank, Access Bank, United Bank for Africa, and FBN Holdings) increased to 58.80 percent in December 2021 from 56.40 percent in December 2020.
It is important to note that the pressure on revenue outweighs the gains from efficiency, and what this means is that costs are magnifying higher than revenue growth.
Of course, lenders have to intensify on their digital strategy to subdue rising operating expenses, as the central banks punitive rules has cast a pall on new revenue recovery
Since the opening of branches in 2021 after a long shut down of head offices and branches across the country in compliance with the lockdown policy imposed by the government to curb the spread of the coronavirus pandemic, operating expenses have been growing.
There are indications that the cost to income ratio may continue to climb due to an energy crisis that balloons the price of diesel oil used to power plants in branch offices across the country.
The energy crisis is majorly caused by the war in East Europe that led to sanctions imposed on Russia by the United States and Europe on Russian for invading Ukraine.
The price of diesel oil reacts to the movement in international crude oil prices.
In short, there is a correlation between Diesel and GDP because the commodity is used for Agric, mining, and industries.
The combined total operating expenses for the five big banks rose by 9.64 percent to N1.39 trillion in December 2021 from 1.26 trillion as at December 2020, according to data gathered by MoneyCentral.
Zenith Bank spent N20.65 billion on fuel, repairs, and maintenance, which is 11.15 percent of other operating expenses. Total operating expenses were up 11.68 percent to N285.75 billion as at December 2021.Its cost to income ratio increased to 50.80 percent in December 2021 from 50.0 percent the previous year.
Access Bank incurred N20.10 billion on fuel, repairs, and maintenance, which is 8.66 percent of other operating expenses. Total operating expenses were up 13.67 percent to N371.14 billion in December 2021 from N326.50 billion the previous year.
United Bank for Africa (UBA) spent 27.97 billion on fuel and maintenance, which is 17.16 percent of other operating expenses. Total operating expenses increased by 11.67 percent to N279 billion in December 021 from N249.84 billion the previous year.
GTCO incurred N9.65 billion on energy, and that represents 10.31 percent of other operating expenses. Total operating expenses 11.65 percent to N162.26 billion in December 2021 from N145.32 billion as at December 2020.