The Economic recession has seen a turn for the worse as most deposit and insurance banks are planning to close down some of its branches as it has become unprofitable to keep them open.
According to the Punch, Investigations show that as at August 31st, 2016, some banks such as; Diamond bank, Heritage bank, and Wema bank have reduced their workers’ salaries.
The reason for the reduction was the growing difficulty in paying salaries as profit margins plunged.
Banks which trade with customers’ profits, can barely boast of income, as very few people have money in the bank due to the economic recession.
These banks claim they can no longer justify their existence. Cost analysis has shown that financial institutions are spending more on salaries and overheads, than the income from the branches.
The slowdown in the economy, which has lent to the high rate of non-performing loans in the banking system, made four lenders to lose at least N17 billion in profits in the first quarter of the year.
According to the results, financial institutions, from the Nigerian stock exchange, Ecobank Transition Incorporated, Guaranty Trust bank, Unity bank, and Diamond bank, recorded a combined decline of N17 billion in their profits before tax for the three months which ended March 31, 2016, when compared with the corresponding period of 2015.
However, the consistent drop in the global process of crude oil, Nigeria’s main foreign earner, since June 2014,earned banks profits to start declining at the end of 2015.
The declining profit in the financial service sector is indeed affecting the bank.