2018 is set to be yet another lucrative year for the banking sector as it has already registered $283, 98 million in the nine months to September 30, 2018. In comparison to the same time last year where the sector recorded $160,68, this year’s $283,98 million represents a 76,68% (when rounded off it’s 77%) increase in profitability.
And yes non-interest income is still the KING, with it contributing 35.50% ($369,20 million) of the sector’s total income. This was a 15,74% increase from $318,97 million from last year’s nine months to September 30. Non-interest income continuous growth and dominating contribution to the banking sector’s revenue stems from cash shortages which have continuously made people resort to using electronic money. Coupling that with the continuous influx of the previously unbanked people into the banking system, it has significantly grown the sector’s non-interest income in recent years. It looks like this upward trajectory of non-interest income will continue into the unforeseeable future as I don’t see cash shortages going away anytime soon.
Meanwhile, interest income from loans contributed 29,73% of total income in nine months leading to September 30, 2018, a 6.81% decrease relative to 36.54% recorded the same period last year. Interest on investments and securities constituted for 21,01% of total income against last year’s 15,56%. Rather than loan out to households and companies, banks have predominantly poured their money into the government’s treasury bills. That explains why interest on loans declined to 29,73% and interest on investments and securities (e.g treasury bills) steadily increased to 21,01%.
It’s not only because of their low risk appetite and the returns relative to (no) risk that’s making banks invest in treasury bills, but they have very strict lending policies which are making it hard for many people and companies to qualify for their preferred loans. And these strict lending policies, in turn, continue to lower the infamous non-performing loans from 8.63% registered in last year’s nine months leading to September 30 to 6,69% recorded in this year’s nine months leading to September 30, 2018.