Four Nigerian banks may lose N88 billion in revenue to the proposed phase out of Commission on Turnover, COT, charges. This may give rise to a minimum rate on savings accounts that could raise interest expense by the banks to N22 billion in 2013, a recent report by HSBC on four out of the twenty- four Nigerian banks has revealed.
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The report, which has been circulated among foreign portfolio investors, said that banks operating in the country will struggle to fully offset negative pressure on revenues as cost of risk starts to increase as loan growth recovers due to tighter regulation of fees and cost of savings account since the beginning of the year. The report focused its search light on First Bank, GtBank, UBA and Zenith Bank.
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The HSBC report said that Nigerian banks will be under stronger pressure to improve operating costs in order to preserve returns. The report singled out Zenith Bank as the bank that is most sensitive to rising cost of savings account and can hold its cost better than its competitors, as well as having better cost control and asset quality.
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The report said that better cost control is the only way for Nigerian banks to mitigate reduction in the sector profitability, but high fixed cost base would limit efficiency gains.