Looking at the half-year reports of leading banks in Nigeria, I can confirm that fintechs are finding seats at the old traditional tables reserved for banks. Yes, it is clearly evident that most banks seem to be struggling with growing interest income, the gold standard of banking.
The FUGAZ (First Bank, UBA, GTBank*Access and Zenith) grew revenue by paltry 2.7% to N1.61 trillion in H1 2021; H1 2020 revenue was N1.57 trillion. That is a very poor performance when you remember that some fintechs are growing in top double digits month-on-month.
Access Bank is picking so much momentum that it may be the bank of the decade if that redesign continues. I spoke in a Lagos-based investment banking Board meeting last week, and one of the board members asked me to comment on GTBank* and Zenith Bank’s drop in revenues. In summary, this was my response:
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Chairman, in the current fintech space in Nigeria, the bank that has the highest overlap with the potential target customers are Zenith and GTBank. They are the banks for professionals with smartphones who can patronize these fintechs across many product lines. In our model, we see more than 80% overlap unlike UBA which drops below 50%. So unlike UBA and Access Bank which welcome any customer (carpenter, bricklayer, etc), these banks for professionals have threatened moats. Yet, I expect Zenith and GTBank to update their playbooks knowing that as fintech rises, their customers are the first targets.
This market is going to be super-competitive as supply of providers is increasing even when the demand base (the credit-worthy customers) is either shrinking or has remained flat. Nigeria’s broad banking sector is super-competitive and the fintechs are adding fudge factors that by 2026, we will certainly have fewer banks.
(Please all our banks are doing well. None has any known issue. This is purely an academic analysis and do not panic.)
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