See how much top Nigerian banks’ staff salaries cost in 2019

See how much top Nigerian banks’ staff salaries cost in 2019 – Nigeria’s five Tier 1 banks spent a total of N366.51 billion on personnel expenses last year, according to the full year 2019 results released by the lenders.

The figure is N35.06 billion more than the N331.45 billion they spent on staff in 2018.

Zenith Bank, Access Bank, United Bank for Africa (UBA), FBN Holdings (the parent company of First Bank Nigeria Ltd) and Guaranty Trust Bank (GTBank) comprise the banking industry first tier lenders.

New Telegraph’s analysis of the banks’ full year 2019 results shows that all of them reported an increase in personnel expenses for the period under review.

A breakdown of the results shows that FBN Holdings spent the most on personnel expenses. The lender’s unaudited full year 2019 results indicate that its staff costs increased by six per cent to N99.3 billion in 2019 from N93.4 billion in the previous year.

It was followed by Zenith Bank, which reported in  its  audited  full year 2019 results, that  personnel expenses rose by 13.57 per cent to N77.86 billion last year from N68.56 billion in 2018.

Following its merger with Diamond Bank in April last year, Access Bank’s  personnel and rent expenses increased by 25.19 per cent to N76.96 billion in 2019 from N61.48 billion in the preceding  year.

Also, UBA’s audited full year 2019 results show that its employee benefit expenses went up by 5.54 per cent to N75.10 billion last year from N71.16 billion in 2018.

Similarly, Guaranty Trust Bank reported a marginal increase in its personnel expenses, as its  audited full year 2019 results show that staff costs  edged up  by 1.16 per cent to N37.28 billion last year from N36.86 billion in 2018.

Analysts note that in the wake of the slump in oil prices in 2016, which pushed the Nigerian economy into a recession in 2016, deposit money banks (DMBs) had to embark on tough cost cutting measures, including laying off of redundant staff and shutting unprofitable branches as part of strategy to cope with the harsh times and remain profitable.

For instance, data obtained from the National Bureau of Statistics (NBS) indicates that 8,663 workers lost their jobs in the first half of 2017. In fact, the data showed that banks sacked an average of 360 workers every week from January to June 2017.

The NBS also stated that in recent years banks have been employing more contract staff in their bid to cut costs.

In addition to sacking redundant staff and shutting unprofitable branches most lenders have also tried to improve cost-effectiveness by optimizing their various banking channels and reducing IT expenses.

Despite the cost cutting measures, banks’ results in recent times indicate an uptrend in their personnel costs, according to New Telegraph’s findings. Financial experts attribute the development to the country’s inflationary environment and the industry’s unsustainable cost structure.

Indeed, commenting on DMBs’ full year 2018 results, the Chief Executive Officer, Financial Derivatives Company (FDC) Limited, Mr. Bismarck Rewane, stated that while most banks reported increase in profit after tax (PAT) and earnings “cost structure (is) a major threat to earnings sustainability.”

However, in a report entitled: “The Productivity Agenda – Moving beyond Cost Reduction in Financial Services,” PricewaterhouseCoopers (PwC) urged banks to look beyond cost-reduction and restructuring measures for profitability and long-term survival.

The multinational professional services network argued in the report that traditional cost-cutting strategies come with inherent limitations, which it said, affect the overall impacts of the strategies on corporate performance and long-term sustainability.

It stated: “With banks struggling to improve their return on capital, many institutions are being forced to restructure and cut costs. Even in the asset management industry, where return on equity is higher than the financial services industry as a whole, there is downward pressure on margins and profitability. Cost cutting will only deliver so much. If financial institutions are to improve profitability in the long-term, they need to fundamentally improve the productivity of the enterprise.”

Commenting on the report, Financial Services Leader for PwC Nigeria, Sam Abu, said: “The cost cutting agenda adopted by many institutions since the financial crisis has, in essence, de-globalised the industry to make it more local or national, shrunk global footprints, divested businesses and shed clients.

“However, this process has run its course. If profitability is to get anywhere near the highs of 15 years ago, what is needed now is a fundamental focus on building a sustainable productive business model that can compete with both incumbent institutions and digital-only competitors.”