BY EMEKA EJERE
Deposit Money Banks (DMBs) in Nigeria have defied the challenging macroeconomic environment to deliver impressive figures across key performance indicators for the first quarter ended 31st March, 2021.
With the performance reaffirming the banks’ ability to navigate the current global economic headwinds occasioned by the impact of COVID 19 pandemic, financial analysts say it is a reflection of good management of the financial institutions.
When COVID-19 took hold across Africa, impacting lives and livelihoods, Nigeria’s banking system was swift to respond. The Central Bank of Nigeria (CBN) took immediate steps, rolling out a stimulus package to combat the effects of the pandemic on critical sectors, including cutting the interest rate on its intervention facilities from 9 to 5 percent.
A look through the lenders’ unaudited financial statements presented to the Nigerian Stock Exchange (NSE), revealed that the performances were majorly driven by optimisation of cost of funds, improvement in non-interest income, higher non-interest income, lower operating expenses among other factors.
It is hoped that with these results, these financial services providers have set a positive tone for the current year, even as the Nigerian economy faces one of the headwinds in its history.
According to its unaudited statement of account presented to the Nigerian Stock Exchange (NSE), Zenith Bank’s profit after tax (PAT) rose by five per cent to N53.1 billion, from N50.5 billion recorded in March 2020. Profit before yax (PBT) also grew by four per cent, from N58.8 billion to N61.0 billion in the same period.
The statement explained that the profitability was driven by the optimisation of the cost of funds and improvement in non-interest income.
In addition, the bank’s cost of funds reduced significantly from 2.6 per cent in March 2020, to 1.1 per cent in March 2021.
This, it stated also reflected in interest expense which dropped by 45 per cent from N32.8 billion to N18 billion over the same period.
Non-interest income increased by 10 per cent from N46.6 billion to N51.2 billion, driven by growth in credit-related fees and fees on electronic products.
Non-interest income was boosted by the increase in fees and commission income, which resulted from the increased volume of transactions across all the bank’s channels.
Similarly, Zenith Bank’s cost of risk in the period under review, dropped from 0.6 per cent in March 2020 to 0.5 per cent in March 2021, which affirmed the bank’s prudent risk management, even as gross loans increased by two per cent from N2.92 trillion to N2.98 trillion in Q1 2021.
The statement notes that the going forward in 2021, the bank expects that the ongoing economic recovery and improvements in the yield environment will translate into improved numbers for the Group.
“This is expected to be supported by local and international COVID-19 vaccination campaigns, rising commodity prices, and global economic growth of up to six per cent, as estimated by the International Monetary Fund (IMF).
“The Group will continue to position itself to take advantage of positive developments in the domestic and global economy to deliver improved financial performance and returns to all its stakeholders,” it added.
United Bank for Africa Plc (UBA)
UBA recorded a 27 per cent increase in its PAT to N38.16 billion in the first quarter of 2021 (Q1’21) from N30.10 billion in the corresponding period of 2020 (Q1’2020).
According to the bank’s unaudited financial statement, the double digit growth in PAT follows 24 per cent increase in PBT occasioned by 14 per cent growth in Gross Earnings. According to the bank, PBT rose to N40.58 billion in Q1’21 from N32.72 billion in Q1’2020.
Gross Earnings (income) rose to N106. 65 billion in Q1’21 from N93.94 billion Q1’2020, indicating 14 per cent increase. The growth in earnings was driven by 14 per cent increase in Net Interest Income and 13 per cent increase in Non-Interest Income.
While Net Interest Income rose to N74.38 billion Q1’21 from N65.42 billion in Q1’2020, Non-Interest Income increased to N32.27 billion in Q1’21 from N28.53 billion Q1’2020.
The bank’s performance was further enhanced by a 23 per cent decline in Net Impairment (losses to bad loans) which fell to N2.03 billion in Q1’21 from N2.64 billion in Q1’2020.
There was also a 1.2 per cent increase in Customers’ Deposit to N7.78 trillion in Q1’21 from N7.69 trillion in Q1’2020, while Loans and Advances to Customers rose by 7.1 per cent to N2.73 trillion in Q1’21 from N2.55 trillion in Q1’2020.
According to the bank, the improvements in key performance indicators, among other things, led to 2.6 per cent growth in the Total Assets of the bank which rose to N7.89 trillion in Q1’21 from N7.69 trillion Q1’2020.
Guarantee Trust Bank (GT Bank)
Coming from N238.1 billion profit before tax declared in its 2020 full year report, GT Bank set a positive tone for the current year, reporting PBT of N53.7 billion for the first quarter of 2021, representing 7.8% decline compared to the N58.2billion recorded in the corresponding period of 2020.
This, according to the bank’s unaudited results for the period, is a modest outing amid economic headwinds occasioned by COVID-19.
Further review of the results showed that Deposit Liabilities increased by 3.0% from N3.611trillion in December 2020 to N3.717 trillion in March 2021, whilst the Group’s Loan book (Net) dipped by 1.4% from N1.663trillion recorded as at December 2020 to N1.639trillion in March 2021.
The bank’s balance sheet remained well structured and diversified with total assets and Shareholders’ Fund closing at N4.993trillion and N837.2billion respectively.
Full Impact Capital Adequacy Ratio (CAR) remained very strong, closing at 26.1%, while Asset quality was sustained as NPL ratio and Cost of Risk (COR) closed at 6.1% (Bank: 5.6%) and 0.11% (Bank: 0.02%) in March 2021 from 6.0% (Bank: 5.9%) and 0.08% (Bank: 0.01%) in March 2020 respectively.
“We have started off the 2021 financial year on a fair footing, and our first-quarter results demonstrate our ability to continue delivering strong and sustainable returns, despite the macroeconomic uncertainties that persist in our business environment”, Managing Director/CEO, Mr. Segun Agbaje, said;
“This is a reflection of the resilience of our franchise, our prudent approach to risk management and the efficacy of our digital-first customer-centric business strategy.”
He also said, “Looking forward, we are optimistic about the long-term value that we will continue to create as an organization. We strongly believe that our new growth strategy, together with the enduring loyalty of our customers, the hard work and dedication of our staff and the unwavering support we continue to enjoy from our shareholders, will enable us drive and deliver best-in-class financial solutions for people, businesses and communities across Africa and beyond.”
Access Bank Plc, posted gross earnings of N222.1 billion during the review period, a six percent increase from N2029.8 billion posted in the corresponding period of 2020. The bank also grew its PBT by 30 percent to N60.1 billion, from N46.2 billion recorded in the same period last year.
A further look at the results showed that PAT grew by 28 per cent to N52.6 billion compared with N40.9 billion in 2020 on the back of a 13 per cent growth in operating Income and a 16 per cent reduction in interest expense.
Group Chief Executive Officer of Access Bank Plc, Mr. Herbert Wigwe, said the performance showed the strong capacity of their business to generate sustainable earnings on the strength of their balance sheet, diverse revenue streams and their dedicated people.
“As a result of effective implementation of our cost reduction strategy, operating expenses remained flat, despite the inflationary environment and increased regulatory cost”, Wigwe said.
“Our retail banking business also showed steady growth with a 112 per cent increase in revenue to N57.5 billion and a 941,631 new customer sign-on via our financial inclusion drive during the quarter. This improvement is evidenced by the consistent and robust savings account growth to N1.3 trillion , leading to asignificant reduction in our cost of funds.
“In line with our risk appetite and efficient risk management, our asset quality continued to improve as guided with NPL Ratio of4.0 per cent (Dec. 2020 4.3 per cent), as we intensified our recovery efforts. Likewise, we expanded our loan portfolio cautiously as reflected by the marginal growth in our net loans and advances to N3.65 trillion year-to-date (Dec 2020: N3.61trillion)”.
Union Bank’s profit before tax rose by 12 per cent to N6.9bn as of the end of the first quarter of 2021 from N6.2bn in the corresponding period of 2020.
A statement titled ‘Group unaudited financial statements for the quarter ended March 31, 2021’ on Thursday (April 29), said that was driven by higher non-interest income and lower operating expenses.
Highlights of the statement said its gross earnings was down by 15 per cent to N36.4bn in the period under review from N42.6bn in Q1, 2020, due to lower interest environment in the Nigeria financial sector.
The statement said net operating income after impairments was relatively flat at N24.3bn in Q1, 2021 from N24.2bn in Q1 2020; while non-interest income rose by 10 per cent to N14.1bn from N12.9bn in Q1 2020, driven by successful debt recovery efforts.
Union Bank said its operating expenses fell by four per cent to N17.3bn from N18bn in Q1, 2020, an outcome of sustained cost optimisation efforts; while non-performing loans ratio was flat at four per cent.
Commenting on the results, the Chief Executive Officer, Emeka Okonkwo, said, “I am pleased to be able to provide the first set of quarterly results under my tenure as CEO following a smooth transition in leadership.
“Despite the challenging economic climate, our bank has maintained a steady performance that we can build on for the rest of the year.
“The bank has responded well to the challenges in the market since the onset of the pandemic. Our overall efforts in Q1 delivered a 12 per cent growth in PBT.
“We are particularly pleased with the consistent growth we are seeing in transaction volumes which validates our digital-led strategy and is delivering returns. By prioritising personalised solutions and enabling self-service, we are attracting transaction-backed deposits and enhancing customer knowledge to better manage risk.”
He said its performance was also supported by strong debt recovery efforts which contributed to growth in non-interest income, enabling it to maintain net operating income at N24.3bn despite the significant reductions on net interest margins across the industry since Q1 2020.
In the period under review, Fidelity Bank Plc posted a 65% increase in profit after tax (PAT) for the first three months of 2021, a swell up by nearly two thirds.
The performance highlighted a surge in net foreign exchange gains from N1.5 billion to N5.4 billion as a major boost to its bottom-line, helping to cushion the blow dealt by operating expenditure on earnings.
At N6.7 billion, the banking sector resolution cost of Fidelity Bank more than doubled the figure for the first quarter of last year, helping other operating expenses to increase by 14.2 per cent. It spent N11.9 billion for that purpose for the whole of 2020.
Gross earnings accelerated by 7.7 per cent to N55.1 billion, helped by improvements in the bank’s two principal income streams: interest as well as fees and commissions.
While the net interest income climbed to N28.8 billion, 17.1 per cent higher than the figure from a year earlier, net fee and commission income was modestly up by 4 per cent at N4.174 billion.
Profit before income tax expense advanced from N6.853 billion to N10.134 billion, while profit for the period stood at N9.590, compared to the N5.859 billion reported for the corresponding period of 2020. Earnings per share were N0.33, up from N0.20.