As competition for deposits increased, Nigerian banks saw their deposits grow by 11.5% over the first nine months of 2021.
Nigerian banks use mobile technology, agency banking and traditional marketing to drive deposits. With the introduction of challenger banks that offer zero or very low migration fees, competition has been fierce. Each bank now has deposits exceeding N1 trillion.
Access Bank was the bank with N6.2 trillion in customer deposits. A closer examination of the data revealed that Access Bank is the top-ranked bank. As it cemented its position as a leader in deposit mobilization among its peers, Access Bank saw its deposits grow by 11.4% year to date. Access Bank’s deposit is still at 18% of the total banking sector deposits.
UBA surpassed Zenith Bank to become the second-largest bank with deposits. Zenith Bank posted a 7.2% increase in customer deposits to N6.08 billion. Zenith Bank posted a total N6.04 trillion growth in deposits, which is a staggering 13.1%. Zenith Bank had the highest deposit growth among its FUGAZ peers. GTB reported N3.7 trillion in deposits, a 6.7% increase.
Tier 2 Banks
Stanbic IBTC, the bank with the highest deposits this year, has crossed the N1 trillion mark. This is after it recorded a staggering 33.5% increase in deposit growth. The FUGAZ has been calling on the tier 2 bank for years. If it continues to move into retail banking, the tier 2 bank could join the fray. Stanbic saw significant growth in term deposits, jumping from N98.2 to N338.7 trillion between September 2021 and December 2017.
Sterling Bank is next to Stanbic with a 21% increase in deposits to N1.1 Trillion compared to N950 Billion in December 2021. Like Stanbic, Sterling Bank’s term deposits saw double the growth from N155.2 billion up to N302.5 billion. Fidelity Bank and FCMB all saw double-digit growth in deposits.
This latest development in financial services poses a serious threat to Nigerian banks’ ability to keep these deposits. Kuda and V Bank, which offer incentives for younger Nigerians not to bank with traditional banks, have made significant inroads in the retail banking sector.
Nigerian banks are responding aggressively to the increase in mobile phone penetration. They have upgraded their mobile banking apps with features that can compete with many of the challenge banking apps. MTN and other Payment Service Banks offer a different type of competition for Nigerian banks.
Despite the threat from competition, Nigerian banks still have significant headroom for deposits and the ability maintain their growth. Newer banks are more focused on younger account openings and newer businesses. Traditional banks have a wealth of products that allow them to mobilize large deposits. Deposits are made from accounts that are held by thousands of fund managers, large corporations with international presence, traders, SMEs, and manufacturers. This deposit chain can be broken only if some challenger banks are able to expand their operations.
There is still plenty of room, considering that the ratio of bank deposits to GDP remains below 20%. For example, the US has more than 80%.