Zenith Bank Nigeria Plc released its 2015 9 Months results showing profits rose 20% year on year to N104 billion. A major contributor to the impressive result was income earned from commission and fees as well as income earned from investments.
For most Nigerian banks 2015 has been characterised by several CBN policies restricting foreign currency demand and supply. However, despite their complaints in the media about these policies most banks have benefited immensely from CBN policies. A look at the make up of Zenith Bank’s commission and fees as well as other income reveals this much.
Fees and Commissions Income
Zenith Bank reported a total income from commission and fees of about N54.5 billion. Inside that amount was about N4.3billion which it classified as “Foreign Withdrawal Charges” up 258% from a year ago. Foreign Withdrawal Charges refers to the charge customers pay whenever they withdraw funds abroad using a Zenith Bank ATM card. People who travel abroad frequently will be familiar with this charge considering how punitive it can be.
The Bank also reported another N1 billion in “Foreign currency transaction fees and commissions down 16.6% from the prior year. As expected this drop was due to the lower volume of transactions following CBN policies.
The bank also reported a trading income of N15.9 billion for the period. About N4.4billion of that amount was from “Foreign Exchange Trading Income”. This refers to income generated from trading forex. That income dropped by 44% for the period apparently due to restrictions placed by the Central Bank on sale of forex.
Zenith Bank also reported another N9.7 billion in other income. Inside that amount is a sum of N7.2 billion representing income from Foreign currency revaluation gain”. This basically represents notional profit booked by the bank whenever forex is converted into Naira. Since the bank prepares its financial statement in Naira, it will have to convert every foreign currency in its possession into Naira. As such when the Naira is devalued it favours the bank. Same time last year the bank posted only N102 million in foreign currency revaluation gain.
In summary, the bank basically made about N17 billion in foreign currency related fees and income. Who says Banks can’t profit from devaluation and restrictions?