Felix Oloyede

Nigerian big banks put up a better-than-expected performance in the first half of the year despite the adverse impact of the coronavirus pandemic of the economy during this period,

Majority of the too-big-to-fail lenders took advantage of their digital platforms and foreign exchange adjustment to grow their revenue, offsetting the decline in interest incomes, which was caused the five weeks economic lockdown, enforced by the government to curtail the spread of COVID-19.

Mr. Charles Sanni, Managing Director/Chief Executive, Cowry Treasurers Limited, argued that with the half-year performance, the banking sector has shown that it is sustainable, and the banks are keen in their growth trajectory.

“The volume of transactions that went through the bank during the pandemic particularly during the lockdown, through the digital banking was a major driver during the period,” he explained.

He also added that though people were at home during the lockdown investment segment of the economy was up and running during this period.

“It also showed that the banking sector is ready for the new normal,” Mr. Sanni said.

Mr. Rotimi Fakayejo, Managing Director, Enterprise Stockbrokers, noted that despite the marginal drop in the gross earnings and profits of these top banks, their performance in H1 2020 is commendable.

“Despite the COVID-19 lockdown, they were able to come up with this kind of results. They were able to make up for the decline in their interest income through the revenue from e-business which grew significantly during this period,” he said.

Mr. Moses Ojo, Chief Economist/Head, Investment Research, PanAfrican Capital Holdings, tied the better-than-expected performance of the top lenders to the disruption in the country’s foreign exchange market, which caused their income from other sources to increase during H1 2020 compared to the same period last.

He added the CBN policy which compelled banks to give out 65 per cent of their total deposits as loans to help stimulate economic growth in the country, also spurred the impressive performance of the big banks in H1 2020.

Zenith Bank makes a double-digit profit

Zenith Bank is one of the big lenders, which was able to weather the storm to grow its interest income and post a double-figure profit in the first six months of 2020. The audited half-year result of the bank showed 4per cent growth in gross revenue to N346billion during this period, driven by 1 per cent rise in interest income and non-interest income which was up 6 per cent.

The marginal growth in interest income is traceable to revenue from loans and advances to customers which ticked up 11.58 per cent to N128.37 billion and placement with banks and discount houses which increased 41.34 per cent to N16.65 billion, but this was counteracted by earnings from treasury bills dipped -46.49 per cent to N28.38 billion in H1 2020.

Zenith Bank pretax profit expanded 2 per cent to N114.12 and post-tax profit went up 17 per cent to N103.82 billion, lifted by the significant drop in income tax expense, which was more than halved from N10.30 billion in H1 2019 to N20.94 billion in the first six months this year.

This was despite impairment charges on bad loans rising 74.2 per cent to N23.9 billion, propelled by 478.95 per cent increase in provision for losses in investment securities, as the bank non-performing loan was only 0.3 per cent less than the regulatory 5 per cent set the Central Bank of Nigeria (CBN), 10 per cent higher to 4.30 per cent of its total which was bad in the same period last year.

The bank improved total loans by 14 per cent to N2.80 trillion, while customer deposits grew by 15 per cent to N4.9 trillion, with total liabilities growing at a faster pace of 21.9 per cent to N6.59 trillion than total assets which went up by 19 per cent to N7.58 trillion; Shareholders’ fund also strengthened 5 per cent to N988.98 billion between December 2019 and June this year.

Zenith Bank is very liquid with a liquidity ratio standing at 50.8per cent compared to 57.3 per cent as of December 2019; the threshold set by the CBN is 30 per cent. The bank’s loan to deposit ratio was slightly above the 65 per cent regulatory benchmark at 66.1 per cent, while capital adequacy ratio (CAR) was 20 per cent, a marginal dip from 22 per cent it had in December last year.

The bank’s shareholders will be getting N0.30 interim dividend for the first half of the year.

Stanbic IBTC Bank grows profit significantly

Among the big banks in the country, Stanbic IBTC Bank recorded significant improvement in its post-tax profit in the first half of the year. The bank grew profit-after-tax (PAT) by 24.7 per cent to N45.2 billion, pretax profit improved 17.4 per cent to N52.4 billion in H1 2020, the PAT was bolstered by 14.3 per cent lower tax paid during this period.

Meanwhile, revenue grew 7.8 per cent to N126.6 billion, aided by 27.2 per cent rise in Non-Interest Income, notwithstanding the 9.3 per cent plunge in interest income.

The growth 27.2 per cent in non-interest revenue to N69.8 billion was driven largely by a 95 per cent year-on-year increase in trading income, while the 9 per cent decline in Interest income to ₦55.1 billion in H1 2020 was attributed to depressed asset yields despite the comparative growth recorded in loans year-on-year.

Interest expense also declined by 18 per cent following deposit repricing and improvement in deposit mix towards cheap funds

The bank made N6.4 billion impairment provision for its toxic assets compared to a write-back of N557 million in H1 2019 as its NPL ratio climbed to 4.9 per cent in June from 3.9 per cent last December.

Stanbic IBTC Bank also made some cuts in cost with operating expenses declining by 3 per cent year-on-year to ₦48.5 billion; other operating expenses declined by 5 per cent due to savings in premises and communication expenses, causing Cost-to-income ratio to improve to 45.2 per cent from 53.2 per cent recorded in the prior year.

Effective tax rate decreased to 13.7 per cent in H1 2020 from 18.8 per cent in the period year because of the change in tax basis for the banking subsidiary. Total Loans and advances also improved 8.8 per cent to N608.7 billion, taking the total assets to N 3.02 trillion, 61.1 per cent higher than N1.88 trillion in recorded in December 2019.

More so, total deposits increased 37.5 per cent to N1.22 trillion between December 2019 and June this year, as total liabilities upped 70.6 per cent to N2.69 trillion during this period.

While Loan to Deposit Ratio declined to 79.1 per cent in H1 2020 from 87.7 per cent in the prior period last year, Return on Asset was 3.8 per cent lower the 4.2 per cent achieved in December 2019 and total capital adequacy ratio stood at 26.1 per cent.

Shareholders’ funds improved to N313.2 billion in June 2020 from N265.9 billion in December 2019 and Return on average equity inched up to 28.3 per cent from 27.3 per cent at the end of the last financial year.

Stanbic IBTC Bank has proposed N0.40 interim dividend to its shareholders.

FBNH tops in profitability

Despite the depressed economy, FBN Holdings, the parent company of Nigeria’s oldest lender, First Bank, recorded a whopping 56.3 per cent in profit-after-tax in H1 2020 compared to ₦31.6 billion posted in the same period last year.

Gross earnings were up 5.8 per cent to ₦296.4 billion, buoyed by 46.8 per cent growth in non-interest income, driven by fees and commission and gains on investment securities, but counterbalanced by over 50 per cent in interest income, due to significant dip in investment securities during this period.

Trading income in the form of net gains in investment securities was up due to the significant volatility in the financial markets, and Electronic banking also contributed meaningfully to the growth into non-interest income, just like the revenue from Letters of credit which grew 82.1 per cent in H1 2020.

It also leveraged on its digital banking during the lockdown as agent banking contribution to e-business revenue increased from 13.9 per cent in H1 2019 to 29.3 per cent in H1 2020. The Group’s performance was also lifted by the completion of the sale of 65 per cent of its stake in FBN Insurance Limited to Sanlam Emerging Markets Limited in the first half of the year.

It grew operating Income 7.7 per cent to ₦211.4 billion, operating expenses also followed the same trend, rising 0.9 per cent to ₦139.2 billion.

FBNH set aside ₦30.7 billion as Impairment Charges for bad loans, which was 38.6 per cent higher than the ₦22.1 billion provisions it made in the same period last year, but it sustained improvement in NPL ratio from 9.9 per cent in 2019 to 8.8 per cent in H1 2020, which was above the 5 per cent regulatory threshold.

Total Assets grew 14.9 per cent to ₦7.13 trillion with Loans & Advances rising 7.7 per cent to ₦1.99 trillion and total liabilities increased by 16.06 per cent to ₦6.43 trillion, on the back of Customer Deposits that was up 8.8 per cent to ₦4.37 trillion.

Cost to income ratio declined to 65.8 per cent in H1 2020 despite lost revenue opportunities arising from stricter regulation, and Cost of Funds improved to 2.8 per cent compared to 3.2 per cent in H1 2019.

Capital Adequacy Ratio also improved to 16.5 per cent during the period under review instead of 15.5 per cent it recorded at the close of business last year.

UBA profit declines despite 2.24% growth in revenue

United Bank for Africa (UBA) was one of the top lenders in the country caught in the web of the economic slump played up by the COVID-19 pandemic and suffered a decline in profitability despite growing revenue in the first six months of 2020.

Its gross earnings were up 2.24 per cent to N300.6 billion from N294 billion it posted in the corresponding period last year, underpinned on Net interest income which ticked up 8.4 per cent to N119.3 billion and net fee and commission income stood at N38.6billion representing a 7.0 per cent increase compared to the similar period in 2019.

However, this could not prevent the pre-tax profit from slipping 18.70 per cent to N57.13 billion and post-tax profit going down 21.70 per cent to N44.43 billion, due impairment provision on loan losses with rose by 150.32 per cent, employee benefit expenses which were up 19.87 per cent and other operating expenses increasing by 22.60 per cent during this period.

The financial Group’s net loans to customers had 6.1 per cent growth to recorded N2.2 trillion as deposits from customers was higher by 25.2 per cent to N4.8trillion. Consequently, Total Assets improved by 21.07 per cent to N6.8 trillion and total liabilities grew 21.34 per cent to N6.14 trillion in H1 2020.

The Group’s Net Interest Margin (NIM) and Return on Average Equity (ROAE) stood at 5.4 percent and 14.4 per cent respectively as at end of H12020.

The NPL ratio for the Group moderated to 4.1 percent (from 5.3 per cent in December 2019), while the cost of risk moderated to 0.7 per cent from 0.9 per cent at the end of last year. It declared an interim dividend of N0.17 per share for every ordinary share of N0.50 each held by its shareholders.

GTBank profit grows at a slower pace

Guaranty Trust Bank (GTBank) post-tax profit declined 4.90 per cent to N94.27 billion its audited result for the first half of 2020. Its Profit-before-tax also dipped 5.2 per cent to close at ₦109.7billion during this period, compared over ₦115.8billion recorded in the corresponding period in 2019.

The bank’s performance was slowed down by 209.65 per cent rise in impairment provision for its toxic assets to N6.77 billion in H1 2020, compared to N2.19 billion it set aside for the same period in the corresponding last year.

Interest income was higher by 2.76 per cent to ₦150.49 billion and other revenue improved by 28.07 per cent to ₦35.91 billion; this was weakened by 30.04 per cent dip in Fee and commission income to ₦24.73 billion during this period.

The bank’s loan book grew by 8.1 per cent from ₦1.502trillion recorded as of December 2019 to ₦1.624trillion in June 2020 and customer deposits increased by 18.5 per cent to ₦3.001 trillion from ₦2.533trillion in December 2019.

The bank closed the half-year ended June 2020 with Total Assets of ₦4.511trillion and Shareholders’ Funds of ₦720.9 billion. In terms of Asset quality, NPL ratio and Cost of Risk closed at 6.8 per cent and 0.4 per cent in June 2020 from 6.5 per cent and 0.3 per cent in December 2019, respectively.

Asset quality remains stable with adequate coverage of 118.1 per cent, while Capital remains strong with CAR of 22.9 per cent. On the backdrop of this result, Return on Equity (ROAE) and Return on Assets (ROAA) stood at 26.8 per cent and 4.6 per cent respectively.

The bank is proposing an interim dividend of 30 kobo per ordinary share of 50 kobo each for the period ended June 30, 2020. GTBank recorded a Return on Equity (ROE) of 26.8 per cent and cost to income ratio of 43.2 per cent.

Forex loss weighs down Access Bank

Access Bank post-tax profit dipped marginally by 1.36 per cent to N61.03 billion, weighed down primarily by the huge foreign exchange loss suffered in the first half of the year. The bank Profit Before Tax (PBT) upped by 1.84 per cent to N74.306 billion from N 72.964 billion recorded in H1 2019.

Gross revenue rose 22.29 per cent to N 396.8 billion for H1 2020, driven by fees and commissions income which ticked up23.67 per cent to N51.77 billion and other operating income that rose 21.42 per cent to N29.64 billion, though interest earnings lowered 6.25 per cent to N211.99 billion during this period.

Net foreign exchange loss which ballooned by 249.47 per cent to N66.19 billion due to the devaluation of the Naira during this period and impairment charges on toxic assets that also spike by 237.50 per cent to N16.47 billion clogged Access Bank performance in H1 2020.

The bank in June 2019 raised $300 million via a Eurobond with a maturity date of October 2021 and at a coupon of 10.5 per cent, meaning it will be paying more to serve this debt with the devaluation from N307/$ in March to N380/$ in July at the interbank market.

Total loans and advances went up 11.11 per cent to N3.40 trillion while total customers deposits increased 9.91 per cent to N5.99 trillion as total assets grew 8.73 per cent to N7.77 trillion and total liabilities also ticked up 8.56 per cent to N7.10 billion.

Meanwhile, Access Bank earnings Per Share (basic) and Earnings per share (diluted) all declined by 8.95 per cent and 9.09 per cent respectively. Access Bank also announced an interim dividend of 25K and its current share price stands at N6.45 as at the close of business on Friday.

The Managing Director of Cowry Treasurers, Mr. Fakayejo projected that the third quarter and year-end results of the banks would witness further improvement as the country’s economy continues to open gradually.