Sterling bank, Union bank lead other Tier-2 banks in Cost-to-income ratio
By Kayode Tokede
At 77.4 per cent and 75.4 per cent, Sterling bank plc, and Union Bank of Nigeria Plc, according to Nigerian NewsDirect investigation led other Tier-2 banks in Cost-to-income ratio in 2020.
Cost income ratio (CIR) is used to evaluate company’s income efficiency.
Sterling bank in 2019 financial year reported 81.2 per cent while Union Bank of Nigeria reported 74.1 per cent CIR.
Sterling bank in its response to Nigerian NewsDirect enquiry stated that ,” The growth in the Bank’s operating expenses resulted from additional investments to expand our digital footprint and significant COVID-19 related expenses to support the government, enable testing and retool our workforce.”
According to Nigerian NewsDirect investigation, factors that contributed to Sterling bank drop in CIR was 2.3 per cent increase in operating income to N89.59billion in 2020 from N87.6billion reported in 2019 and operating expenses that dropped by nearly three per cent to N69.3billion in 2020 from N71.09billion in 2019.
For Union Bank, the Chief Financial Officer, Joe Mbulu, in a statement stated that, Significant inflationary pressures and the translation of currency depreciation drove growth in our cost base, however we maintained strong control, limiting operating expense increase to 10per cent (N77.9billion from N70.8billion), well below the rate of inflation.
“Consequently, we saw marginal increase in our cost to income ratio to 75.4per cent from 74.1per cent.
However, Stanbic IBTC reported 47.4per cent CIR in 2020 from 50.4 per cent in 2019.
Further findings by our correspondent revealed that Guaranty Trust Bank Plc (GTBank) with 38.24 per cent in 2020 from 36.11per cent in 2019, has the lowest CIR in the banking industry.
The bank in its presentation to investors/analysts stated that, “ Overall, Cost containment remains an anchor of the Group’s strategic objectives as the Group recorded a CIR of 38.2 per cent from 36.1 per cent in 2019, well below the Group’s financial year 2020 guidance of 40 per cent.
“The group recorded a 12.6 per cent growth in operating expenses from N131billion in 2019 to N147.4billion in 2020.
“The growth was primarily driven by depreciation and amortization which grew by 28 per cent as a result of incremental change on capital spend on expanding IT infrastructure in Q4 2019 as well as capitalisation of amount spent on Furniture & Equipment, computer hardware and software procured for Branches in prior year.”
