GTBank hits 38.1% cost-to-income ratio, CIR [in its simplest form, it means using N38.1 to make every N100], declaring full year 2017 profit before tax of N200 billion. Zenith Bank had a CIR of 52.7%. There are three key ways you can improve CIR: reduce cost or increase income or do both simultaneously. As all the banks report, I expect the average to come down to 59%. Generally, Nigerian banks are improving CIR as they deploy technologies, enjoying the productivity gains. This trend is expected to continue.
“GTBank has continued to report the best financial ratios in the industry as revealed by its return on equity (ROE) of 35.4 per cent and cost to income ratio of 38.1per cent evidencing the efficient management of assets and operational efficiency.
“Overall, the bank has enshrined its position as a clear leader in the industry.
Walk from CBN HQ to the Cadastral Zone in Abuja, you would notice that most banks had closed their branches and deployed ATMs. They have since stopped printing bank statements, charging for the SMS alerts. Generally, customers get better deals. The N4 you pay for SMS alert is a better deal than going to a bank to check payment receipt.
As they publish their reports, I am seeing great numbers – efficiency is improving. This is a big lesson: when TSA was being implemented, many said the banking sector would shrink. What I am noticing is that when government took its cash, they restructured and today most banks are leaner, and more efficient. The TSA was a blessing as in the quest to reduce cost, the banks adopted technology which improved productivity. The losers are Nigerian workers who lost jobs.
With the changes made, do not expect many fintechs to do well in the Nigerian banking sector. The banks are indeed premium startups now striking partnerships with Facebook, Mastercard and other global entities one would have expected fintechs to lead. They can thank TSA for the acceleration of that redesign.
This is the expected natural trajectory as the ICT utilities take over the lands. Once Facebook perfects the integration with MasterCard on Messenger, it would do same on Instagram and WhatsApp. Then, it would be opened to any financial institution that wants. MasterCard is a natural payment aggregator, agnostic of banking institutions. Facebook would be the platform while MasterCard would act as the “interface institution”[payment processing] and banks the hosts [the accounts]. The implication is that over time few would bother to notice the hosts, focusing more on the platforms [once you have set up an account and put your bank details, there is no need to even remember the bank again as the transactions would happen on Facebook while MasterCard handles the underneath processing with the banks].
The banks are doing what they have to do: with Facebook Corp, there is no other alternative – you either fall in line or you go extinct. This is going to be the future of banking in Nigeria. No one goes to a bank in China; most go to WeChat to do banking. Facebook has a plan for that in Nigeria. The plan is now under execution.
Survival drives innovation. Our banks are innovating, from UBA to Wema, from Diamond Bank to FCMB; we are seeing real market-driven competition. And today, most can operate without any government money. That is how a great economy emerges.