Isola Moses | ConsumerConnect

The current economic realities in Nigeria are compelling banks and other financial institutions to rewrite their business plans, a report has said.

ConsumerConnect learnt that a shortage of Dollars and the declining demand for credit by borrowers, along with a plunge in domestic bond yields, have taken a toll on their bottom lines in recent times.

Most of the country’s biggest banks, including Guaranty Trust Bank Plc, United Bank for Africa Plc and Access Bank Plc, reported profit declines in first half, reports Bloomberg.

Cairo-based EFG-Hermes Holding SAE forecasts lower industry income in 2020 compared to a year ago.

The report recalled how the Nigerian economy contracted heavily in the second quarter, how some of the country’s largest banks are confronting the troubles spawned by COVID-19 pandemic and subsequent drop in crude prices in the international oil market.

Nigeria’s GDP contracts by 6.10 percent Q2 2020: National Bureau of Statistics (NBS)

Guaranty Trust Bank: Nigeria’s biggest lender by market value said last week it will transition to a holding company next year to allow diversification to reduce reliance on banking.

The financial institution plans to establish units in insurance, asset management, payments and pensions. It also plans to split the banking division into four subsidiaries covering Nigeria, West Africa, East Africa and the UK.

It’s partnering with Leadway Assurance Company Limited to boost sales of insurance products.

GTBank’s profit reportedly falls as the economic downturn weighs on operations.

Access Bank Plc: The nation’s biggest bank by assets is expanding throughout Africa.

It plans to open a unit in Mozambique in the second half and in Guinea next year. Earlier this year, it opened a unit in Cameroon and bought Transnational Bank Limited. in Kenya.

The lender is executing a five-year plan to be “Africa’s gateway to the world” by increasing its presence in the continent.

United Bank for Africa:  The lender, which already operates in 20 African countries, is pushing for units outside its home market to provide a “buffer” for earnings, according to Ugochukwu Nwaghodoh, Chief Financial Officer (CFO) of the bank.

It was gathered that United Bank for Africa Plc said in 2018 it expected contributions from foreign branches to its profit to increase to a half by next year from 45 percent.

The financial institution was said to have invested more than $100 million in units in the Democratic Republic of Congo, Benin, Ivory Coast, Tanzania and Mozambique to help them expand and cushion challenges in the home market, Nigeria.

Stanbic IBTC Holdings Plc

The Nigerian unit of South Africa-based Standard Bank Group Limited is seeking regulatory approval to establish a wholly owned Life Insurance unit.

The bank plans to own 99.9% of the unit to be named Stanbic IBTC Insurance Limited.

FBN Holdings Plc: After selling its insurance unit to bolster capital, FBN deployed the 25 million naira in proceeds to expand retail franchise, First Bank of Nigeria, and strengthen its online presence.

The bank recruited shop owners in areas with lower bank penetration to undertake financial services, including account openings, money transfers and payments on its behalf.

Through the retailers, or agents as they are known, it increased the value of agency transactions to 5.71 trillion naira in first half from 1.61 trillion naira a year ago.

Agent banking contributions to e-business revenue rose to 20.3% in June from 13.9% year ago while low-cost deposits at First Bank accounted for 87.2% of total deposits in first half from 85.7% in December, helped by agency banking.

Zenith Bank Plc: Zenith Bank Plc, mainly a corporate lender, is said to be moving to build a retail franchise.

The lender started so-called agency banking last year and achieved phenomenal growth in value and volume of transactions in the first half. It shares commission with the retailers or agents.

The value of transactions on the agency banking platform rose to 226 billion naira in the six months through June compared to 56.2 billion naira June to December 2019 while transaction volume was 22.1 million in the first six months of 2020 from 7.5 million June to December last year, said the report.