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Aggressive deposit drive see Nigerian banks push past N34 trillion in customer deposit

Nigerian Banks grew their deposits by 11.5% in the first 9 months of 2021 as competition to grow deposits intensified.

Data from Nairalytics Research show total customer deposits held in ten of Nigeria’s largest banks topped N34.4 trillion in the first 9 months of 2021 about N3.55 trillion higher than what was reported at the end of 2020.

Nigerian banks have deployed mobile technology, agency banking, business strategies and other traditional forms of marketing in driving deposits. Competition has been intense with the advent of challenger banks offering zero or next to nothing in charges to migrate. All 10 banks now have deposits in excess of N1 trillion.

FUGAZ leads the pack

A closer look into the data reveals Access Bank came tops as the bank with the largest customer deposit in Nigeria with N6.2 trillion. The bank grew its deposits by 11.4% Year to date as it cemented its leadership in deposit mobilizing among its peers. Access Bank’s deposit however remains at 18% of total banking sector deposits.

UBA edged out Zenith Bank as the second largest bank with deposits, posting a 7.2% rise in customer deposits to N6.08 trillion. Zenith Bank reported a total of N6.04 trillion in third place growing deposits by a whopping 13.1%. Zenith Bank’s deposit growth was the highest among its FUGAZ peers. GTB reported a deposit of N3.7 trillion representing a 6.7% rise.

Tier 2 Banks

Stanbic IBTC is the most aggressive bank this year when it comes to deposits, crossing the N1 trillion mark after recording a massive 33.5% deposit growth this year. The tier 2 bank has been knocking on the FUGAZ door for years and could join the fray if it continues its sojourn into more retail banking. Stanbic recorded significant deposit growth in its term deposit category jumping from N98.2 billion to N338.7 billion between December last year and September 2021.

Next to Stanbic is Sterling Bank with a 21% rise in deposits to N1.1 trillion compared to N950 billion in December 2021. Just like Stanbic, growth for Sterling Bank came from its term deposits which doubled from N155.2 billion to N302.5 billion. Fidelity Bank, FCMB and Union Bank all recorded double-digit growth in their deposits.

Threat of Challenger Banks

The latest development in the financial services space poses a major threat to the ability of Nigerian banks to continue to hold on to these deposits. Challenger banks such as Kuda, V Bank have made significant inroads into the retail banking space as they offer incentives to younger Nigerians to abandon the more traditional banks.

With the continuous increase in mobile phone penetration, Nigerian banks have also fought back aggressively, upgrading their mobile bank applications with features that compete favourably with most of the challenge banking applications out there. Apart from Challenger banks, Payment Service Banks like MTN also provide a different form of competition to Nigerian banks.

Despite the threat posed by the competition, Nigerian banks still have significant headroom in terms of deposits and the ability to maintain their growth. While most newer banks focus on attracting younger account openers or newer businesses, traditional banks create a value chain of products built into their ecosystem that allows them mobilize a sizeable deposit. For example, deposits are mobilized from accounts held on behalf of thousands of fund managers, government accounts, large corporates with international presence, traders with high import and export needs, SMEs, manufacturers etc. Breaking this deposit chain will require a significant expansion of the operations of some of the challenger banks.

However, there is still a large room considering that bank deposits to GDP is still under 20%. The US for example has over 80%.

source: nairametrics

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