E-Financial

UBA, Others Lead as African Banks Make Waves

Published

6 years ago

June 20, 2018

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Ade Ayeyemi’s office in Lomé, the capital of Togo, is a good place to think about crossing borders. Ghana is ten minutes’ drive away.

From his window the boss of Ecobank can watch trucks rumble along the seafront, some bound for Burkina Faso, a day’s journey, or Mali, perhaps another day on. At night, cargo ships twinkle offshore. From here Ecobank’s vision—“to integrate the continent”, Mr Ayeyemi says—is clear. Whether it will be profitable is less obvious.

Ecobank was founded in 1985 by business leaders with backing from the Economic Community of West African States, a regional bloc. It has branches in 33 countries, more than any other African bank (see chart). It is not alone in its ambitions. Nigeria’s United Bank for Africa (UBA) wants to make half its profits elsewhere in the continent by 2022. South Africa’s Standard Bank recently opened in Ivory Coast, its 20th African country. Moroccan banks are trekking across the Sahara.

African bankers have long preached some version of what Tony Elumelu, UBA’s chairman, calls “Africapitalism”: the idea that far-sighted, home-grown businesses can drive development. In Nigeria banking reform in 2005 set off a wave of consolidation. The survivors were heftier and more profitable, with capital to invest abroad. Kenyan banks have used their edge in innovation, such as mobile banking, to push into neighbouring markets.

Regional banks are now filling gaps left by their European and American rivals, which are retreating from a continent they once dominated. Barclays sold a majority stake in its African business last year. Other global giants have also reduced their exposure to African markets, which they judge too small and too risky in an era of tightened regulation. African banks work closer to the ground. “Banking is a relationship game,” says Ugochukwu Nwaghodoh, chief financial officer of UBA. “We have local knowledge.”

The pan-African vision often clashes with the reality of a fragmented continent. Africa’s regional banks earn lower returns and grow more slowly than domestic rivals, calculate consultants at McKinsey. One problem is the wide diversity of regulations and markets. Another is that banks are too small outside their core markets to grow organically, says Olamipo Ogunsanya, an analyst at Renaissance Capital. Some have made risky acquisitions, inheriting loan books with hidden troubles. Most banks, she argues, would do better to focus on a few key countries.

Consider Ecobank. The board ousted a previous boss in 2014 over allegations of mismanagement. In 2016 a recession in Nigeria, its biggest market, resulted in a $131m pre-tax loss. It has shut 74 branches there and laid off 2,000 staff. It has scaled back its ambitions beyond west Africa. Although it has returned to profit, about 10% of its loans are non-performing. Expansion may have been too rapid, Mr Ayeyemi admits.

But regional bankers see two big trends in their favour. The first is new technology, says Mr Ayeyemi, which makes it possible to operate on a continental scale as never before. Ecobank can design products and process data centrally, he notes, providing services even where it lacks physical branches. Is Africa’s diversity a problem? “You don’t ask Unilever the same question,” he replies, likening retail banking to selling consumer goods. Ecobank’s mobile app, which lets people open accounts on their phones, has attracted over 5m users since its launch in 2016.

The other helpful trend is the spread of regional banks’ corporate clients. A recent study by the Boston Consulting Group finds that the top 30 African companies now operate in an average of 16 countries, twice as many as a decade ago. Standard Bank’s clients range from construction firms to airlines, says Sola David-Borha, who heads its operations on the continent outside South Africa. “They are helping to grow our market share, as we use our expertise to support their expansion.”

Regional banks are also using their geographical reach to act as natural conduits for cross-border flows of capital, such as migrants’ remittances. Mr Nwaghodoh argues that UBA’s large footprint reduces the cost of intra-African trade, since the bank can stand at both ends of the transaction. He also cites the example of the aid sector, where donors need a “last-mile” presence to distribute cash or pay workers.

The growth of cross-border banking carries risks, says Amadou Sy of the IMF. Regulators need to patch the holes through which a crisis in one country could leak into another. A supervisory college for Ecobank, comprising regulators from the countries where it operates, first met in 2015. European experience shows that such measures are not always enough, warns Thorsten Beck of Cass Business School in London. “When a bank actually fails,” he says, “then the politics comes in.” Although most African banks hold plenty of capital, problem loans have been rising.

Yet Mr Sy also notes that regional banks can spur competition and export innovation. A study by Mr Beck published in 2015 found that African firms got loans more easily when foreign banks held a larger market share—as long as those banks came from Africa or elsewhere in the developing world. Expansion has not yet paid off for Africa’s banks. But, like the incoming waves beyond Mr Ayeyemi’s window, they have the tide behind them.

This article appeared in the Finance and economics section of the print edition under the headline “Making waves”

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E-Financial

Nigerians Pay Five Levies for Electronic Transactions

Published

9 hours ago

May 8, 2024

Comms Week

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A bank customer in Nigeria pays as much as five different charges electronic transactions on one account and Netizens are not happy about it.

Only on Monday, Central Bank of Nigeria (CBN), added another 0.5 per cent cybersecurity levy to be charged on select bank transactions.

However, the apex bank exempted loan disbursements and repayments, salary payments, intra-account transfers within the same bank or between different banks for the same customer, and intra-bank transfers between customers of the same bank from the levy.

Also exempted from the levy were inter-branch transfers within a bank, cheque clearing and settlements, ⁠Letters of Credits, ⁠and Banks’ recapitalisation-related funding only bulk funds movement from collection accounts, savings, and deposits, including transactions involving long-term investments, among others.

But below is the list of charges Nigerians have to pay whenever they make electronic transfers.

Cybersecurity levy

N5 is charged on the transaction of N1,000

N50 is charged on the transaction of N10,000

N500 is charged on the transaction of N100,000

N5,000 is charged on the transaction of N1,000,000

N50,000 is charged on the transaction of N10,000,000

Transfer fee

N10 is being charged on the transaction below N5,000

N25 is being charged on the transaction between 5,001 and N50,000

N50 is being charged on transactions above N50,000

Stamp duties

N50 is being charged on transactions between N10,000 and N10,000,000

Short Messaging Service (SMS)

N4 is being charged on each electronic transfer notification

(Customers who use e-mail-only notification are not charged for this service)

Value Added Tax (VAT)

N0.75 is being charged on the N10 transfer fee

N1.875 is being charged on the N25 transfer fee

N3.75 is being charged on the N50 transfer fee.

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E-Financial

AMMBAN Decries CBN Directive on CAC Registration of PoS Operators

Published

11 hours ago

May 8, 2024

Chike Onwuegbuchi

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Association of Mobile Money and Bank Agents of Nigeria (AMMBAN) has frowned at the recent directive by Central Bank of Nigeria that Point of Sale terminal operators should register with Corporate Affairs Commission by July 7, 2024.

They argued that implementing the directive will put over 70 percent of PoS operators out of business thereby frustrating financial inclusion initiative of the federal government.

Mr. Fasasi Atanda, national president, AMMBAN, said that the directive contradicts the current CBN agent banking regulations which clearly allow individuals to be onboarded as agents under the sub-agent category.

“Currently Nigeria has over 1.8 million agents in which over 70 percent are sub-agents without registered businesses, operating under agent network – super agent arrangements. They are the most penetrating channel of financial inclusion. Now, we want to eliminate them with CAC registration,” he stated.

It would be recalled that the Federal Government through the Corporate Affairs Commission on Monday issued a two-month registration deadline to Point of Sales companies, to register their agents, merchants, and individuals with the commission in line with legal requirements and the directives of the Central Bank of Nigeria.

The agreement was reached during a meeting between Fintechs and the Registrar-General CAC, Hussaini Ishaq Magaji, in Abuja.

Speaking at the meeting, the CAC boss said the measure aims at safeguarding the businesses of Fintech’s customers and strengthening the economy.

He further stressed that the action was equally backed by Section 863, Subsection 1 of the Companies and Allied Matters Act, CAMA 2020 as well as the 2013 CBN guidelines on agent banking.

The CAC boss said the timeline for the registration, which will expire on July 7, 2024, was not targeted at any groups or individuals but genuinely aimed at providing protection for businesses.

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E-Financial

UBA Consolidates Gains as Gross Earnings Rise by 110 Percent, Profit Hits N156Bn

Published

11 hours ago

May 8, 2024

Ugo Onwuaso

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United Bank for Africa Plc (UBA), Africa’s Global Bank , has released its financial results for the first quarter ended March 31st, 2024, showing very strong growth across key performance measures.

Oliver Alawuba, GMD, UBA Group

The Group’s results, which were released to the Nigerian Exchange Limited (NGX) on Friday May 3rd, 2024, saw outstanding year-on-year increases: Gross Earnings rose by 110%, from N271.1billion to N570.2 billion; Interest Income grew by 130%, to N440.7 billion. Operating Income increased by 115%, from N175.7 billion in 2023, to N378.59 billion.

Further consolidating the record performance delivered in the Group’s 2023 Full Year Audited Financials, UBA again saw Profit Before Tax rising significantly by 155% from N61.7 billion in Q1 2023, to N156.34 billion in Q1 2024; while Profit After Tax jumped from N53.5 billion to N142.5 billion, representing an impressive rise of 165% year-on-year.

Commenting on the results, Oliver Alawuba, group managing director, UBA, said the Group delivered strong first quarter performance, building on the solid momentum of 2023, as well as the ongoing execution of its long-held strategy of customer focus, geographic diversification and effective risk management and governance.

He said, “Our record Q1 profit before tax was delivered with triple digit gross earnings growth, supported by very strong interest and non-interest income. Fees and Commissions rose by 118% year-on-year on the back of improved efficiencies and continued digital adoption. This has helped drive improvement in efficiency and customer satisfaction, with the Group’s cost-to-income ratio held at 57.8%.”

“The Group’s balance sheet grew steadily with Total Assets increasing by 23% to N25.4 trillion. Customer deposits closed at N18.4 trillion, recording a 23% increase year-on-year, largely attributed to growth in current accounts and savings accounts.”

“Our unwavering commitment to sound governance, robust risk management, and financial strength positions us for continued growth, while we contribute meaningfully to inclusive economic development across our network.”

Also speaking on the performance, Ugo Nwaghodoh, executive director, Finance and Risk, said the Group’s operating results for the quarter showed the actions taken to enhance the Group’s performance continued to deliver.

He said, “Our first quarter results highlight our relentless customer focus and the strength of UBA’s geographic and product diversification, with good performance across all our regions. We continue to differentiate ourselves across all key financial metrics, with a keen focus on high-quality risk adjusted revenues and cost discipline, while maintaining very sound asset quality.“

“We remain committed to reducing both interest expense and operating expenses and expect to make steady progress as we move through the year toward our stated profitability targets,” Nwaghodoh stated.

United Bank for Africa Plc is a leading Pan-African financial institution, offering banking services to more than twenty-five million customers , across over 1,000 business offices and customer touch points, in 20 African countries and across 4 continents.

With presence in the United States of America, the United Kingdom, France and the United Arab Emirates , UBA connects people and businesses across Africa through retail; commercial and corporate banking; innovative cross-border payments and remittances; trade finance and ancillary banking services.

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