IBFC Alliance Consulting, a research and business advisory firm, has identified loan growth, fees and commissions as some of the drivers of revenue for banks in the country.

The company, in its latest ‘Strategic Outlook of the Nigerian Banking Industry’, emphasised the need for banks to develop new sources of revenue.

This, it said, would help lenders to continue to effectively play their intermediary role in the economy.

According to IBFC Alliance, loan growth will be determined by level of interest rate, underserviced customer segments and emerging economic sectors.

Another factor that will drive revenue in the banking sector has to do with net interest margin dynamics.

However, major problem areas for banks, according to the firm, include the recent increase in the Asset Management Corporation of Nigeria’s levy, Nigerian Deposit Insurance Corporation’s premium, increase in Cash Reserve Ratio and the regulatory foray into determining interest costs on savings deposits.

Amid these challenges, the firm said the balance sheet growth prospect of banks looked promising.

“Banks need equity capital to maximise the growth opportunities; improved return on equity will ease banks’ ability to raise equity capital,” it added.

The Managing Director, IBFC Alliance Consulting, Mr. Funmi Agusto, expressed optimism that the banking industry would continue to grow because of opportunities and the size of the Nigerian economy.

He said, “In the next five years, we believe that the banking industry would grow. In the next five years, we believe that the industry would need to find new sources of revenue because more likely, we would have a higher rate of growth in loans and advances, so that interest income from those loans and advances would partly offset the revenue that would be lost from things such as the removal of CoT.

“But for a bank to grow its balance sheet, it has to grow its capital base and the amounts of capital we are talking about are not small sums of monies. So banks really need to be very efficient with the issue of capital,” he added.

Punch