Top banking articles on Stears Business
It is raining billions of naira in profit in the banking industry. Even with a global pandemic and the Nigerian economy shrinking by 2% year-on-year, Nigeria’s five largest banks recorded a combined profit larger than ₦645 billion ($1.6 billion) in 2020. For comparison, MTN Nigeria and Dangote Cement, the largest publicly traded companies in Nigeria, combined for a $1.2 billion profit last year.
But beyond the coronavirus pandemic, Nigerian banks have posted these impressive numbers against a historical backdrop of restrictive regulation, poor macroeconomic performance and a shallow pool of customers. For instance, roughly a third of Nigerians are completely financially excluded, which means that most Nigerians do not regularly access banking services and Nigerian banks are only serving a fraction of the market.
Still, banks record tremendous growth. Since 2013, the banking index on the Nigerian Exchange (NGX) has made a total return of 66%—the second-highest of the five sectoral indices grouped on the NGX—to investors.
Today, we run through the business models and operational activities of firms in the industry, from the traditional to the neo-challenger banks. Take this compilation as a highlight of stories that show what makes the banking sector so tick.
1. Carbon vs Kuda: The experiment to improve banking for digital natives
Banking halls are gradually moving to the top of people’s “least favourite place to be” list. But neo banks like Carbon and Kuda have sensed this discomfort and created digital services that now drive innovative, paperless and remote banking.
This article breaks down the business model of how Kuda Bank and their rival, Carbon differ in their strategies in shaping the digital banking experience for Nigerians.
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2. Why is Branch pivoting to digital banking?
Branch International started operations in the financial ecosystem as a digital lender seven years ago. But with the pandemic came a desire to pivot. Today, the lender has introduced savings and investment services with annual returns as high as 20%. Returns on one-year investment on financial instruments like bonds are rarely this high. However, in this story, we break down Branch’s ambition to be like Nubank, one of South America’s biggest digital banks that’s valued at over $10 billion and gained 20 million customers after its pivot.
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3. How commercial banks are adapting to digital banks
As the competition between traditional and neo banks for a market share of digital loans, millennials’ deposits, and payments get more intense, who is poised to win?
This story breaks down the answer to this question with a new way to look at the sector. Could they both be fighting a battle that can be easily won? Afterall, the traditional banks have the size advantage, while the digital banks lead with speed and innovation.
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4. Restructuring Nigeria’s banks: Holdco fever
In this story, we looked into the trend of banks restructuring to becoming a holding company. Stanbic IBTC Holding. FCMB Holding. FBN Holding. UBA Group. These brands are some of the more common holding companies and Guaranty Trust Holding Company (GTCO) has recently joined them.
But why are they unique among their peers? What are the non-banking businesses they engage in that drive their profits even higher than normal banks?
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5. What can Open Banking do for Nigeria?
Open banking solves most of today’s financial integration challenges. It’s an innovation that can facilitate more competition and liberate the Nigerian financial ecosystem. But it works when Banks can give up their monopoly on customer data. After this, fintechs can build the resources and infrastructure to provide tailor-made financial solutions for faster growth in the financial industry.
For instance, many people use multiple bank accounts and are constantly logging in on different bank apps. Annoyingly, we can’t manage our money in one place. So why are we not yet embracing open banking that can help solve a problem like this?
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6. Banks in Nigeria: Gender diversity statistics
None of Nigeria’s major banks has more women than men but a few are inching towards a balanced employee gender pool. In this story, we took a critical assessment of the diversity topic but focused on the banking industry.
Among the major banks that disclose their information to the public, only Access Bank is in compliance with the CBN’s guidelines that at least 40% of the management team is female.
See how other top tier banks are leading the way.
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7. Insider bank loans: A dangerous trend in Nigeria
Poor credit risk management and lack of corporate governance have led to the insolvency of many old banks like Bank PHB and Oceanic. Against this backdrop, First Bank had to write off over ₦150 billion worth of non-performing loans (NPLs) in the last four years—an amount that can start six national banks.
But the bank was also recently in the news for insider loans abuse. With this story, we took a critical look at lessons the industry must learn from its past troubles.
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8. What are the biggest problems with Nigeria's Banking system?
Still on the theme of bad loans, and poor corporate practices at some of our banks, we take a drive to 2018 when we published this next story on Nigeria’s banking system biggest problems.
Guess what? Bad loans are the number one issue. To understand when to call a bank loan bad, how it can be a problem and other major problems that Nigerian banks face, this free to read piece is one that will enrich you with answers.
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9. Big spenders: Nigeria’s Tier 1 banks and your deposits
A deep deposit base and loan portfolio determine how important a bank is to the economy. In Nigeria, five are taking the lead. Popularly known as "FUGAZ" banks, they dominate profits and loans.
This story shows how these top tier banks are investing your deposits and how, surprisingly, Fidelity Bank (not part of the FUGAZ) is hot on their trails, in terms of deposit acquisition.
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10. How Stanbic achieved higher profits during a pandemic
We started this list by motivating it with how much money banks make despite the harsh operating environment. But to end it, we focus on one bank and share how it grew its finances during the 2020 pandemic.
Even before Covid-19, banks had expected a hard 2020. The CBN reduced ATM charges and maintenance fees by 46% and 67%. So how did Stanbic navigate the tides to record an 11% profit growth?
Read the full article here