Deposits: Eight banks lose N239bn as customers opt for treasury bills

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The deposit base of eight top commercial banks in Nigeria dropped by N239 billion between the first half of 2016 and the first half of 2017, investigations by The Point have revealed.

A detailed analysis of the banks’ 2017 half-year results showed that total customer deposits in the affected financial institutions declined from N9.312 trillion as at the end of the first half of 2016 to N9.073 trillion as at the end of June, 2017.

The banks include First City Monument Bank Plc, Diamond Bank Plc, Wema Bank Plc, Stanbic IBTC Bank Plc, Unity Bank Plc, Access Bank Plc, Fidelity Bank Plc and Zenith Bank Plc.

Specifically, while the deposits of Wema Bank dropped from N283.3 billion to N252.7 billion, Fidelity Bank declined from about N830 billion in H1 2016 to N761 billion in the comparative period of 2017. Access Bank recorded a decrease, from N2.179 trillion in H1 2016 to N2.127 trillion in N1 2017; while Stanbic IBTC’s deposits also declined, from N694 billion to N681 billion, in the period under review.

Others are Unity Bank, from N264 billion to N254 billion; FCMB, from N658 billion to N633 billion; Diamond Bank, from N1.420 trillion to N1.390 trillion; and Zenith Bank, from N2.984 trillion to N2.975 trillion.


Managing Director, Cowry Assets Management Limited, Mr. Johnson Chukwu, attributed the decline in banks’ deposits to the recent influx of investors to the Treasury Bill market.

According to him, investors looking for passive investment in the country are now making their money work for them by investing in Treasury Bills.

TB is a type of government securities, issued on behalf of the Federal Government by the Central Bank of Nigeria, to control money supply in the economy.

Chukwu explained that, unlike other government securities such as the Federal Government of Nigeria Bonds and Federal Government Development Stocks, which are long-term in nature, TBs are short-term securities issued at a discount for a tenor ranging from 91 to 364 days.

He said, “Customers are becoming a lot more aware of what is happening at the treasury bills market, and they are saying if they can put their money in treasury bills at 17 per cent discount, why should they put their money in a bank at 12 per cent? So, banks will have to increase their cost of deposits, just to match or get close to the sovereign rate.”

An analyst at Ecobank, Mr. Kunle Edun, said a lot of the Pension Funds Administrators, insurance companies and individuals were not willing to do fixed deposit again.

He said, “If they do fixed deposit, they get around seven per cent interest. But they can get as high as 18 per cent from TB. A lot of the banks today are losing deposits because of this. What the PFAs are saying is that ‘if you cannot match treasury bills, bring back my money.’ Individuals are also saying: if you can’t give what treasury bills will give me, I am not going to save money with you.

“If banks don’t have deposits, they can’t give loans. The few banks that are ready to match treasury bills’ rates are doing that at a cost.”

The Dean, Faculty of Business Administration, University of Uyo, Prof. Leo Ukpong, said the increasing awareness of the opportunities in the treasury bills’ market was making a lot of banks lose deposits to fixed income investments.

According to him, that is one major reason Nigerian banks are currently finding it extremely difficult to mobilise deposits from institutional investors such as Pension Fund Administrators, insurance companies as well as individuals.

“This is because most investors and bank customers now benchmark interest rates on term-deposit, as against treasury bills rate,” he said.

A fund manager and financial analyst, Mr. Joseph Ikhile, also attributed the banks’ customer deposit loss to the treasury bills’ unique investment opportunity to investors.

He said, “They offer security and guaranteed premium returns to investors. For instance, recently, the 364-day instrument offered by the Central Bank of Nigeria recorded excess subscription to the tune of N91.1 billion, while the CBN allotted N136.5 billion at a stop rate of 18.5 per cent, relative to the offered amount of N120 billion.

“The 91-day (offer amount: N29.1 billion; subscription: N26.1 billion) and 182-day (offer amount: N80 billion; subscription: N69.75 billion) instruments were, however, undersubscribed, while the CBN allotted N23.2 billion and N69.57 billion at stop rates of 13.4 per cent and 17.4 per cent, respectively. These were clear indications that many bank customers were moving towards investing in treasury bills instrument.”

Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, had said foreign exchange speculators, who had converted their naira to the dollar were now re-converting the greenback to naira in order to invest in fixed income securities.

He said those that doubted the ability of the CBN to sustain its intervention were now convinced that the banking sector regulator had enough ammunition to sustain its foray in the market.

“People have been observing the development in the forex market. We have observed, for over four months, that the CBN has continued to emphasise that it will continue to intervene. Despite the frequent intervention by the CBN, the reserves have also not been depleting. So, that has boosted confidence,” Ebo noted.

Many of the banks, however, blamed the decline in deposits, especially term-deposits, on the high interest rate on government securities induced by the restrictive monetary policy of the CBN.

In a bid to checkmate inflation, which rose to a peak of 18.72 per cent in January, restrain demand for foreign exchange as well as attract foreign currency inflow from foreign portfolio investors, the CBN had kept its Monetary Policy Rate at 14 per cent since July 2016, while offering treasury bills at interest rates as high as 20 per cent.

However, some of the banks’ corporate affairs managers, when contacted, declined comments on the grounds that they were not in a position to speak on the issue.

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