CRR: Banks’ profits slow down in first quarter
The new Cash Reserve Requirement policy by the Central Bank of Nigeria (CBN) may have started affecting the profits of some Deposit Money Banks as witnessed in the first quarter report of some banks.
Three major banks who posted their first quarter result yesterday recorded huge reduction in profits compared to what they obtained within the same period last year.
In January, the Central Bank of Nigeria (CBN) raised banks’ Cash Reserve Requirement (CRR) on public sector deposits from 50 per cent to 75 per cent. The policy, which took effect on February 4, led to the withdrawal of about N1trn from the banks. This development is not totally new but a follow up to the monetary policy decision made in August 2013, when the CBN raised the CRR from 12 percent to 50 percent.
Since that time, banks have continued to struggle to source for deposit from private sector and individuals, through increasing interest rate of savings accounts and other facilities. In the last quarter of 2013, the public sector deposits dropped by about N1 trillion in the banks.
Yesterday, Reuters reported that the United Bank for Africa (UBA) said its pretax profit fell to N13.54bn ($83.5m) in the first quarter, down 21.1 percent from N17.16bn a year earlier.
However, gross earnings grew to N68.1bn during the three months to March 31, against N62.9bn in the same period last year, it said in a filing with the Nigerian Stock Exchange.
Reuters also reported yesterday that Guaranty Trust Bank’s firstquarter pretax profit fell 2 percent to N28bn.
But gross earnings climbed to N67.6bn in the three months ended March 31, from N63.9bn in the same period last year. Operating costs rose 10 percent to N23.86bn.
In the same development, Fidelity Bank reported that its first-quarter pretax profit fell to N4.45bn ($27.44m), down 25.08 percent from N5.95bn a year earlier.
Gross earnings also dropped to N30.95bn during the three month period to March 31, as against N31.43bn in the same period of last year, it said in a filing with the Nigerian Stock Exchange.
Only Stanbic IBTC Holdings’ first-quarter pretax profit rose 47 percent to N8.96bn, the local unit of South Africa’s Standard Bank said yesterday.
Gross earnings rose to N30.22bn in the three months ended March 31 from N26.58bn in the same period last year, it said in a filing with the Nigerian Stock Exchange.