Disparities in bank charges exposed

The Reserve Bank of Malawi (RBM) has exposed huge discrepancies in charges and tariffs by the country’s 12 commercial banks.

The new charges, published by the central bank this week, have shown a wider interest rate spread—a gap between lending and savings deposit rates—which market analysts argue is the highest in the region.

The spread for Opportunity Bank—with maximum lending rate of 40 percent and savings deposit rate of 10 percent—is 35 percent, Ecobank is 27.5, FDH Bank 32, FMB 26, Indebank 31, Malawi Savings Bank (MSB) 27, National Bank of Malawi (NBM) 27.75, NBS Bank 25, Standard Bank 35, Internation Commercial Bank (ICB) 33, CDH Investment Bank 29 and Nedbank 37.75 percent.

Ecobank’s maximum lending rate on personal loan is 37.5 percent, FDH 40, FMB 37, Indebank 39, MSB 37, NBM 35.75, NBS 36, Standard Bank 40, Opportunity Bank 45, ICB 42, CDH 36 and Nedbank 42.75.

Standard Bank and Nedbank are offering the lowest savings deposit rates of five percent while NBS Bank and FMB’s savings deposit rate of 11 percent is the highest seconded by Ecobank and Opportunity Bank at 10 percent, according to the statement.

Business News has also learnt that Opportunity Bank is topping local banks in processing fee on personal loans as it is charging 3.5 percent of loan amounting K5 000 ($20) while National Bank of Malawi (NBM), FMB, Standard Bank and ICB are charging one percent of their respective minimum loan amounts.

On interim statement, ICB is charging the lowest tariff of K600 (about $2.50) per page while NBS Bank is the highest at K2 000 (about $8) per page. FDH Bank is charging K1 100 (about $4.50), CDH Investment Bank K1 000 ($4) and MSB K1 000 ($4) per page.

While Ecobank, FDH Bank, NBM, ICB and Standard Bank are offering free services on monthly personal savings, FMB and Nedbank are charging K800 ($3.20). Indebank is charging K100 (about $0.40), MSB and Opportunity Bank K200 (about $0.80).

Ecobank, Indebank, Standard Bank and NBM do not charge for withdrawals customers make through the auto-teller machine (ATM), but FMB is charging K100 ($0.40), Opportunity K85 ($0.32) and NBS Bank K95 per withdrawal.

RBM spokesperson Ralph Tseka said in an interview on Wednesday that the idea behind publishing the bank charges is to help customers make informed decisions when opening bank accounts.

Said Tseka: “Banking is a business. It is like when you go to a tomato market where some sell their tomatoes at K70 ($0.28), K50 ($0.20) and others at K100; so you got a choice on which tomato to buy. We want people to make informed choices when going to banks.”

But in its latest commentary, Alliance Capital Limited, a registered portfolio and investment manager, observes that there is a huge difference between deposit and lending rates by banks which it says culminates into the institutions registering billions in profits.

“It makes interesting reading, especially when you look at the combined effect of the spread between the lending rates and the savings deposit rates and the various charges. It is nauseating, especially when banks shamelessly boast of their +100 percent increase in profits when most businesses are experiencing a downturn,” it says.

The new charges come at a time when the banking community is experiencing a historical shortage of kwacha currency on account of a recent sharp devaluation and a subsequent flotation of the Kwacha.

The revised charges also come on the back of a revised base lending rate by RBM to 21 percent from 16 percent which has prompted all banks to respond by also hiking their base lending rate to record high.

Consumers Association of Malawi (Cama) executive director John Kapito described the recent hike in bank lending rates as “prohibitive and quite depressing,” saying after the devaluation of the kwacha, consumers never anticipated another hike in bank lending rates.

Kapito warned depositors to brace for tough times as the deposit rates the banks are offering are far much lower than the projected inflation rate of 18.4 percent in 2012.

Bankers Association of Malawi (BAM) president William Chatsala could not be contacted for comment as he was reportedly in a meeting.

But BAM previously argued that Malawi has favourable bank charges and relatively high deposit rates in the region.