Banks Cut Corporate Social Responsibility Spending Despite Making N2trn Revenue

… CBN Needs To Carry Out Thorough Examination Of Banks- Expert

Deposit Money Banks are beginning to cut their spending on Corporate Social Responsibility despite posting huge revenue and profits from their operations.

About five banks listed on the Nigerian Exchange Limited reduced their budget for CSR by 32.6 per cent in the first half of 2023, an analysis by THE WHISTLER has revealed.

The banks analysed are Access Holdings Plc, Guaranty Trust Holding Plc, Jaiz Bank Plc, Wema Bank and Ecobank Transnational Incorporated (ECOBANK).

During the period, four of the banks- Access Holdings PLC, Guaranty Trust Holding Plc and Wema Bank reduced their spending on CSR to N555.18m in the first six months of 2023 from the N736.42m they spent in 2022, reflecting a 32.6 per cent shortfall despite recording huge profits and revenues.

Ecobank did not fully disclose its spending on CSR as there was no report on CSR or spending related to community development, gifts, or charity that appeared on its financial statement for the first half of 2023.

The first half of 2023 was a good period for Nigerian banks. The five banks made a combined revenue of N1.98trn an amount which grew by 79 per cent compared to the N1.11trn posted in 2022.

The banks also posted an impressive profit which rose to N580.5bn from N282.99bn, reflecting a 105.12 per cent surge during the period.

CSR is a concept in management that encourages businesses to include social and environmental issues into their everyday operations and relationships with stakeholders.

Financial experts believe that CSR can help banks maintain financial stability, particularly when there is crisis. In 2020 during the COVID-19 pandemic, banks with higher levels of environmental and social activities were more financially stable, according to research.

Studies have further shown that investors are more patient and lenient towards banks with strong CSR policies during an economic recession.

Access Bank Plc posted the highest profit among the five banks with a growth of 58.8 per cent from N591.8bn to N940.3bn while the bank’s profit rose from N88.7bn to N135.4bn.

Although the bank said it identifies with the aspirations of the community and the environment in which it operates, it added that its contributions to charitable and non-charitable organisations was N455m as of June 2023. This represents a fall from N541m in June 2022.

GTCO grew its revenues year-on-year by 181 per cent from N239.28bn in 2022 to N672.6bn while its profit also rose by 261 per cent from N77.55bn in 2022 half year to N280.48bn in 2023.

However, GTCO slashed its CSR spending by 165.4 per cent from N147.69bn in June 2022 to N55.64bn, despite the huge profit and revenue it declared in the review period of 2023.

“In order to identify with the aspirations of various sections of the society, the Group donated a total sum of N55,639,501.47 (June 30, 2022: N147,691,122) as donations and charitable contributions during the period. It comprises contributions to educational organizations, Art and Cultural organizations, and Professional organizations amongst others,” the bank said

Jaiz Bank had impressive first-half figures with its revenue growing from N14.3bn in 2022 to N20.34bn. Aside from the revenue growth, its profit also surged from N2.46bn to N3.77bn in 2023.

The bank however, did not budget for CSR in the first-half of 2023.

Wema Bank’s gross earnings rose from N60.29bn to N89.6bn in 2023 which reflects 48.6 per cent improvement. The bank’s profit also rose by N98.8 per cent from N5.27bn to N10.49bn in 2023.

But the lender reduced its CSR donations by 7.15 per cent from N47.74m in 2022 to N44.5m in 2023.

Ecobank recorded N267bn in revenue from its African operations, up from the N205.57bn recorded in 2022. The bank also witnessed a surge in profit from N108.9bn in the first half of 2022 to N150.3bn in the corresponding period of 2023.

However, the company did not make provisions for its CSR spending. Ecobank’s books were silent on any entry related to CSR in the form of donations, gifts, or any form of charity.

CBN Needs To Examine Health Of Nigerian Banks-Expert

Paul Alaje, a Partner and Senior Economist at SPM Professionals said banks declaring huge profits and revenue without spending much on CSR and paying attractive dividends has raised the question about the true position of their health.

The analyst argued that the Central Bank of Nigeria needs to conduct a proper audit of the books of Nigerian banks to ascertain their health. He believes that it would make them stronger and more resilient amidst potential crisis.

Alaje said, “Regarding the CSR budget, the truth is that the money owned by the banks is fast reducing. Many may wonder how banks are still declaring huge profits, but we need to carefully study the books of the banks. Yes, even though they are recording revenues from some of their banking activities when you check the health of our banks, are most of them really healthy? And why is it that despite the huge revenue declared and profit after tax they declare, much of the money remains unshared? Much of the money they say they are ploughing it back to investment for the coming year’s operations.

“For me, I think the Central Bank should look beyond the books of the banks and do a proper audit of most of our commercial banks. The reason why banks fail is because the regulatory body (CBN) has not carefully taken time to sit with the commercial banks and look beyond what is self-audited.”

Alaje argued that banking activities are aimed at making profits and delivering dividends to shareholders which means that they would cut budgets for any expenses including spending on CSR.

“I can tell you that most of our banks are not as healthy as we think. It does not mean that any bank will fold up tomorrow but some of the policies, and the macroeconomic environment have not been fair to the banks and the performance of most of these banks is not as high as many of us really expect therefore,” he added.