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Tier 1 Reclassification: Understanding Nigeria's Digital Banking Playground

Jun 20, 2022   •   by   •   Source: Proshare   •   eye-icon 3371 views

Digital Banking 


Table 20: The Digital Income Wars in Numbers

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While it is true that in absolute numbers, bigger banks have larger digital earnings when viewed as a ratio of income from electronic banking to gross earnings, tier 11 banks are no laggards. 


Interestingly, second-tier banks also seem to find it easier to convert deposits to loans as their loan to deposit ratios are in a few cases higher than that of their tier 1 rivals. Besides GTCO and Stanbic IBTC, which posted outlier returns on assets (ROA), tier 11 banks walked in lockstep with their higher-tiered competitors.   


However, return on equity (ROE) told a different story. Larger banks seem to achieve higher equity returns (see table 21 below). 


Table 21: Snapshot of Nigerian Banks Performance 2021

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The share price movements of Nigerian banks listed on the Nigerian Exchange Group (NGX) trading floor huddle around a narrow price band. But higher-priced banks like Zenith Bank, GTCO, and Access Bank have seen more distinct patterns, which recently have moved within a bearish trading channel with Access Holdings and GTCO engaged in arm-wrestling for price dominance. 


As JP Nicols noted, the business of banking is becoming less about a place as it is about space, the digital space. The dominance of a digital service delivery platform that touches bank customers at their pain points will separate the strong from the weak. The size of bank headquarters and branches would be meaningless when meeting customer needs as customers will increasingly decide that banks are what people do rather than places people go. 


Nigeria's old banking playbooks become shredded as battling institutions become more customer-centric by applying big data to build artificial intelligence (AI) and machine learning (ML) architectures. The new architectures will enable customers to travel more smoothly across their service journey experiences. 


In relief, Nigeria's banking landscape is a Roman Coliseum with gladiators of all sizes using preferred weapons of warfare to stay in the financial arena with minimal loss of blood. 

Downloadable Versions of Tier 1 Banks Report (PDF)

1. Executive Summary: Nigeria’s Banking Industry: The Case for Redefining Tier 1 Banks - May 28, 2022

2. Full Report: Nigeria’s Banking Industry: The Case for Redefining Tier 1 Banks - May 28, 2022

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