Regulatory Costs, Inflation Push Banks’ Operating Expenses To N874bn

Regulatory Costs, Inflation Push Banks’ Operating Expenses To N874bn
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By Marim Sanni

Nine commercial banks in Nigeria recorded an aggregate operating expense of N874.8bn in the first half of the year.

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This figure indicates an increase of N51.9bn from the total OPEX of N822.9bn recorded in the corresponding period of 2020.

The banks are United Bank for Africa, Access Bank, First Bank Holdings, GTBank, Zenith Bank, Fidelity Bank, Sterling Bank, Union Bank and First City Monument Bank.

The banks, in their audited financial results for H1, identified double-digit inflation rate, regulatory costs such as the Asset Management Corporation of Nigeria charge of 0.5 per cent on total assets and the Nigeria Deposit Insurance Corporation, fall in domestic currency, among others as factors that contributed to the rise in OPEX within the review period.

During the period under review, headline inflation hovered between 16 per cent and 18 per cent, data obtained from the National Bureau of Statistics showed.

A monthly breakdown of inflation rate within the stated period shows that in January, inflation stood at 16.47 per cent but increased to 17.33 per cent in February. In March, inflation hit a record high of 18.17 per cent.

However, in April, inflation rate fell to 18.12 per cent; it fell further to 17.93 per cent and 17.75 per cent, in May and June respectively.

Further analysis of the reports shows that in H1 2019, the operational cost of the nine banks stood at N727.bn, indicating an increase of N147.2bn, while in H1 2018 the banks recorded OPEX of N657.8bn.

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Access Bank recorded a steady rise in operation cost from H1 2018 to H1 2021. It reported about 26 per cent increase in operating expenses from N98.3bn in H1 2018 to N123.3bn in H1 2019 and a nine per cent rise from N174.3bn in H1 2020 to N189.8bn in H1 2021.

The bank explained that the nine per cent increase recorded in H1 2021 was driven by the enlarged franchise following acquisitions in Kenya, Mozambique, South Africa and Zambia.

“OPEX at bank level was flat despite the increase in regulatory costs (17 per cent), depreciation and amortization (16 per cent). We continue to optimise our costs despite the inflationary environment,” the bank said.

In H1 2018, Zenith Bank’s operating expenses stood at N126.5bn, but rose to N126.8bn in H1 2019; it grew further in H12020 to N135.8bn and N149.8bn in H1 2021.

UBA recorded operating cost of N103.7bn in H1 2018; N109.6bn in H1 2019; N132.1bn in H1 2020 and N132.8bn in H1 2021.

First bank recorded an operating cost of N119.3bn in H1 2018 and N148.3bn in H1 2019. The bank reported that its OPEX fell to N139.2bn in 2020 but rose by 9.6 per cent to N152.6bn in H1 2021.

In H1 2018, FCMB operating expenses was N37.4bn. By H1 2019, the bank’s OPEX increased to N39.7bn and N44bn in H1 2020. Its latest financial report showed that in H1 2021, FCMB’s operating cost rose nine per cent to N48bn.

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GTBank recorded a consistent increase in operation cost from H1 2018 to H1 2021. It reported about N3m increase in operating expenses from N69.6bn in H1 2018 to N69.9bn in H1 2019 and a N6bn rise from N83.3bn in H1 2020 to N89.3bn in H1 2021.

The operating costs of Fidelity Bank during the review period are N32.3bn in H1 2018; N34.3bn in H1 2019; N46.8bn in H1 2020 and N42.2bn in H1 2021.

Sterling Bank reported N32.3bn opex in H1 2018, N34.3bn in H1 2019; N32.1bn in H1 2020 and N35.5bn in H1 2021.

A cursory look at the performance of Union Bank showed that the bank continued to witness a reduction in operational expenses until H1 2021 when its OPEX rose to N36.8bn from N35.4bn in H1 2020. In H1 2018, the bank’s OPEX was N39.2bn. It fell to N37.26bn in H1 2019.

Amid Supply Constraints, Crude Oil Hits $77

By Cyril Ogar

The price of the international crude oil benchmark, Brent, rose on Thursday amid supply constraints and a drop in United States oil reserves.

As of 9:16pm Nigerian time on Thursday, Brent traded at $77.19 after it rose by 1.13 per cent while the US West Texas Intermediate rose by 1.33 per cent to trade at $&3.19 per barrel, according to Oilprice.com.

S&P Global Platts reported that US commercial crude stocks fell to its lowest since October 5, 2018 by 3.48 million barrels to 413.98 million barrels according to data from the US Energy Information Administration.

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Senior market analyst at OANDA, Edward Moya, was quoted as saying by Platts, “Crude prices rallied after US stockpiles tumbled to the lowest levels since October 2018.”

Moya explained that oil market fundamentals were turning bullish as concerns of an economic slowdown in China eased and amid forecasts that supply shortages for natural gas could lead to increased demand for oil.

ANZ Research analysts similarly noted, according to the report, that crude oil prices had risen as supply availability was back in focus, with US oil inventories falling for the seventh consecutive week.

Oilprice.com also reported that Indian oil imports rose in August while its oil production dropped.

Indian government data as quoted by Economic Times India stated that the country’s oil imports jumped by 23 per cent to 4.2 million barrels per day as the country imported more from the US and Latin American countries.

India is Nigeria’s largest importer of crude oil, according to trade data from the Nigerian Bureau of Statistics.

Aljazirahnews


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