RESERVE Bank governor Gideon Gono embarked on a campaign to punish alleged “speculators” who hoard large sums of money which he thinks belong to the banking system.
He obviously ignored one crucial factor discouraging people fro
m taking their money to banks: most people are fed up with being plundered by heartless banks debiting large sums of money from customers’ accounts in so-called bank charges.
I am particularly peeved by one particular bank, the “big” one called Barclays. The kind of charges made by this bank amount to extortion, and, to be honest, do not encourage saving, but discourage it.
As a customer of the bank for the past 10 or so years, I am discouraged to think that when other commercial banks are busy sweating their assets to ensure they provide shareholder value, Barclays appears determined to survive through hefty charges on customers.
A cursory look at the bank’s recent results is overwhelming: the bank’s net interest income/total income was less than 10%, with non-interest income/total income at some 90%.
Where did most of the non-interest income come from given that the market has been bereft of any meaningful deals?
Apparently, banks like Barclays are taking advantage of the flight to safety occasioned by the banking crisis of 2004, and punishing undemanding depositors for choosing them rather than the newer banks.
Of all the commercial banks in the country, NMB had the highest net interest income/total income after Barclays at a negligible 45%, and the rest were at 50% and above. Barclays also took the distinction of having the highest cost to income ratio at 75% against a market average of 38%.
We need an explanation from Barclays management, otherwise Gono has to forget about people parking their hard-earned money in the banking system to prop up inefficient banks.
* Barclays responds:
We are cognisant of the effect on customers of the difficult operating environment. A significant portion of our fee income is not driven by bank charges as we have tailored structured facilities which benefit our customers and provide us with opportunities to earn additional fee income.
The bank reviews its charges periodically and takes into account various factors such as cost to provide service to the customer as well as the absorptive capacity of our customers.
The income earned from bank charges was well below inflation. The high cost of funding reduced the contribution of net interest income which adversely affected the non-funded income to total income and cost to income ratios.