Ten commercial banks’ OPEX reaches 932.26 billion naira in first half of 2021, boosted by double-digit inflation, AMCON Levy, others

By Darasimi Adebisi

Despite the abundant profits reported by deposit banks around the country in their second quarter reports, it appeared that the double-digit inflation rate, among other factors, resulted in a total operating expense (OPEX) of 10 banks by seven percent to 932.26 billion naira in semester 2021 (H1) compared to 871.67 billion naira in the comparable period of 2020.

Analysis of bank results submitted to the Nigerian Exchange Limited (NGX) showed that regulatory costs such as the Asset Management Corporation of Nigeria (AMCON) charge 0.5 percent on total assets and the Nigeria Deposit Insurance Corporation (NDIC), currency, were other factors that contributed to the increase in OPEX of these 10 banks during the period under review.

Recently, the National Bureau of Statistics (NBS) announced that Nigeria’s inflation rate closed in June 2021 at 17.75%, compared to 17.93% and 18.12 recorded in May and April, respectively.

The inflation rate in January was 16.47 percent but rose to 17.33 percent in February. The office reported an inflation rate of 18.17% in March 2021.

Industry analysts believe that the rise in bank operating expenses is mainly due to regulatory costs.

Further analysis of the results showed that banks operating in the country recorded OPEXs below the inflation rate during the period, due to the reduction in staff costs.

For example, Access Bank Plc reported an increase of around 9% in operating expenses to 189.8 billion naira in the first half of 2021 from 174.3 billion naira in the first half of 2020, while operating expenses of Zenith Bank Plc rose 10.3 percent to 149.85 billion naira in the first half of 2021 from 135 naira. 0.85 billion in the first half of 2020.

Access Bank hinted that the nine percent OPEX growth was due to the franchise expansion following the acquisition in Kenya, Mozambique, South Africa and Zambia.

“The OPEX at the Bank level has remained stable despite the increase in regulatory costs (17%), depreciation and amortization (16%). We continue to optimize our costs despite the inflationary environment, ”explained the bank.

Guaranty Trust Holdings Plc (Guaranty Trust Bank) declared 89.34 billion naira of OPEX in the first half of 2021, an increase of 7.2% from 83.31 billion naira, as OPEX of Fidelity Bank Plc having fell 10 percent to 42.25 billion naira in the first half of 2021 from 46.84 billion naira in the first half. 2020.

GTCO in a presentation to investors and analysts attributed the increase in OPEX to the headline inflation rate and the marginal movement of the Naira / US dollar rate in the official market which resulted in the increase in general prices of goods and services.

According to the bank, “operating costs were largely impacted by a 27.3% growth in AMCON expenses and 9.3% in depreciation expenses”.

In addition, United Bank for Africa Plc reported a 0.5% increase in OPEX to N132.8 billion in the first half of 2021, compared to N132.13 billion in the first half of 2020, while that of FBN Holdings Plc increased by 10 % to N152.57 billion in the first half of 2021 compared to N139. 17 billion in the first half of 2020.

FBN Holdings explained that the 35.4% increase in regulatory costs was responsible for the surge in OPEXs, stressing that management continued to focus on cost control as a key priority.

In the same vein, Standard IBTC Holdings with 14% to N55.37 billion in the first half of 2021 against N48.54 billion in the first half of 2020 recorded the highest OPEXes of the period, while the OPEX of the sterling bank increased. from 11% to N35.5 billion in the first half of 2021. from 32.1 billion naira in the first half of 2020.

In addition, FCMB Group Plc declared N47.95 billion from OPEX, a nine percent increase from N44.05 billion in the first half of 2020, while Union Bank of Nigeria increased its OPEX of around four percent to 36.8 billion naira in the first half of 2021 compared to 35.4 billion naira. in H1 2020.

Commenting, the Head of Financial Institutions, Agusto & Co, Mr. Ayokunle Olubunmi, noted that the increase in banks’ operating expenses was attributed to the increase in the cost of the operating environment and regulatory costs.

According to him, “the increase in operating expenses differs from bank to bank. The AMCON direct debit and the NDIC premium also contribute to the OPEX of the banks. Keep in mind that the double-digit inflation rate and the fall of the Naira this year has had an impact on bank spending. Since banks do not operate in isolation, this should of course affect their OPEXs during the period. “

For his part, the CEO of Enterprise Stockbrokers, Mr. Rotimi Fakeyejo, said TODAY that the harsh operating environment of companies has had an impact on OPEX of banks.

He noted that banks were careful in managing costs by reducing personal expenses, among other things based on the need to remain profitable.

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