Banks post strong performance in H1 2022 despite head winds

Given the central role financial institutions play, incidents of bank failure in any society almost invariably translate into the expansion of financial crisis within that society and beyond.

Some banks in Nigeria today boast of between 20 to 30 million customers. As a result, whatever negative befalls any of the big financial institutions usually affects the teaming stakeholders of that institution including customers, staff, business partners among other connections and persons connected to it in one way or another.

And this is not exclusively Nigerian as the failure of Lehman brothers and Morgan Stanley in America was partly the reason the Government of President Barrack Obama injected over $700billion to stabilize the economy of USA during his tenure.

Correspondingly, Nigeria through AMCON also injected not less than N5trillion to contain the crumbling financial system in 2007/2008.
To guard against a repeat or further financial crisis, regulators all over the world reviewed their regulatory designs to pay special attention to large and big financial institutions.

The Central Bank of Nigeria (CBN) in 2018 introduced Domestic Systemically Important Banks (D-SIB) a term used for banks which are believed to be too big to fail given that if they slide into any crisis, the government is expected to support them because of their importance to the economy and the wrong signal they could send to foreign investors.

It was specifically targeted at “financial institutions whose distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity” said CBN.

These banks include First Bank of Nigeria, United Bank for Africa (UBA), Zenith Bank Plc, Access Bank Plc, Ecobank Nigeria Plc, GT Bank Plc, Skye Bank Plc and Diamond Bank Plc.
These banks, according to the apex bank (D-SIBs) accounted for 63.80 per cent of the industry total assets of N35.10trillion and 65.23 per cent of the industry total deposit of N21.73 trillion as well as 66.00 per cent of the industry total loans of N15.34 trillion.

Since then some of the banks have fallen out of this group, including Skye Bank Plc now Polaris Bank and Diamond Bank which has recently been acquired by Access bank Plc. However, there have been no official replacement of these banks.

Zenith Bank

Zenith Bank is a tier 1 bank which is quite formidable and indeed pushing ahead with even stronger gusto. It is one of the Domestic Systemically Important Banks with a total asset and shareholders funds of N8.682trn and N1.09trn respectively.

Zenith Bank has grown its total asset by 78.93 per cent from N4.739 trillion in 2016 to N8.481trillion in 2020. Its profit before tax grew 69.05 per cent from N151.348billion in 2016 to N255.861billion in 2020; Shareholders equity also grew 59.8 per cent from 2016 to 2020.

Analysts have noted a number of strong points about the bank. They reckon that it is the only bank in the financial industry that has continued to grow organically in spite of the induced mergers and acquisitions by an industry-wide and Central Bank of Nigeria-sponsored Consolidation programme in 2005. This means that the bank has continued to maintain a consistent and undiluted corporate culture since its founding. With a vision to play in the big league, Zenith Banks management had decided to grow up its capital when most of its contemporaries lacked the capacity to do so. The bank had gone public before the 2005 banking consolidation policy of the CBN which was indeed a quite visionary thing to do and which was to put it ahead of competition.
From that vantage point, the bank has maintained not only a steady growth, but also a leadership position in the industry over the years.

Among the few top performers, what distinguishes Zenith Bank is not just its mega size balance sheets but the high degree of innovation and quality of ideas which forms the bedrock of its operations.

According to its unaudited statement of account presented to the Nigerian Stock Exchange (NSE), Zenith Banks profit after tax (PAT) rose by five per cent to N53.1 billion, from N50.5 billion recorded in March 2020. Profit before tax (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 banks 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 banks channels.

Similarly, Zenith Banks 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 banks 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.

As a testament to this superlative performance and in recognition of its track record of excellent performance, Zenith Bank was voted as Bank of the Year (Nigeria) in The Bankers Bank of the Year Awards 2020, Best Bank in Nigeria in the Global Finance Worlds Best Banks Awards 2020 and Best Corporate Governance Financial Services Africa 2020 by the Ethical Boardroom. Also, the bank emerged as the Most Valuable Banking Brand in Nigeria, for the fourth consecutive year, in the Banker Magazines Top 500 Banking Brands 2021 and Number One Bank in Nigeria by Tier-1 Capital in the 2020 Top 1000 World Banks Ranking published by The Banker Magazine. Similarly, the bank was recognised as Bank of the Decade (Peoples Choice) at the ThisDay Awards 2020, Retail Bank of the year at the 2020 BusinessDay Banks and Other Financial Institutions (BOFI) Awards, and Best Company in Promotion of Good Health and Well-Being as well as Best Company in Promotion of Gender Equality and Women Empowerment at the Sustainability, Enterprise and Responsibility (SERAS) Awards 2020.

United Bank for Africa Plc (UBA)
With presence in over 20 countries, United Bank For Africa(UBA) United Bank for Africa (UBA) Plc is one of Africas largest financial institutions with operations in several African countries and three global financial centers; New York, London and Paris. plots to dominate Africa with its unique banking services. By virtue of its huge size, UBA is one of the Systematically Important Banks and may dominate Africa with its unique banking services.

A legacy bank which has not only survived many headwinds, but it has also left its peers behind to compete even with the best in the world, UBA boasts of over eight million customers, and 700 offices across the globe, UBA is obviously a leading brand in Africa, and beyond. Its total assets by 119.6 per cent in the last five years from N3.504trillion in 2016 to N7.697trillion in 2020. Its profit before tax also grew 45.4 per cent from N90.642billion in 2016 to N131.860billion in 2020. UBAs stock has grown 16.9 per cent year on year to close at N7.35 percent on Friday May 21, 2021 with a market capitalization of N247.946billion.

UBA recorded a 27 per cent increase in its PAT to N38.16 billion in the first quarter of 2021 (Q121) from N30.10 billion in the corresponding period of 2020 (Q12020).

According to the banks 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 Q121 from N32.72 billion in Q12020.

Gross Earnings (income) rose to N106. 65 billion in Q121 from N93.94 billion Q12020, 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 Q121 from N65.42 billion in Q12020, Non-Interest Income increased to N32.27 billion in Q121 from N28.53 billion Q12020.

The banks performance was further enhanced by a 23 per cent decline in Net Impairment (losses to bad loans) which fell to N2.03 billion in Q121 from N2.64 billion in Q12020.

There was also a 1.2 per cent increase in Customers Deposit to N7.78 trillion in Q121 from N7.69 trillion in Q12020, while Loans and Advances to Customers rose by 7.1 per cent to N2.73 trillion in Q121 from N2.55 trillion in Q12020.
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 Q121 from N7.69 trillion Q12020.

Guaranty Trust Bank (GT Bank)

GT Banks high year on year performance, professionalism, efficient service delivery and strong brand equity have made the lender a clear industry leader.

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 banks 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 Groups Loan book (Net) dipped by 1.4% from N1.663trillion recorded as at December 2020 to N1.639trillion in March 2021.

The banks 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.

GTBank has continued to report the best financial ratios in terms of profitability, efficiency and capital for a Financial Institution in Nigeria as revealed by its return on equity (ROAE) of 30.9%, cost to income ratio of 37.1% and capital adequacy of 23.4%. These ratios are a testament to the efficient management of the Bank. In recognition of the Banks bias for world class corporate governance standards, excellent service delivery and innovation, GTBank has been a recipient of numerous awards over the years. Some of the Banks awards in 2018 include Bank of the Year Nigeria from the Banker Magazine, Best Banking Group and Best Retail Bank Nigeria from World Finance Magazine, Most Innovative Bank from the African Investor, and Best Digital Banking Brand in Nigeria from the Global Brands Magazine.

In its audited financial statements released for December ended 2020, the bank reported 4.6 per cent leap year-on-year in revenue to N455.23bn from N435.31bn, 2.33 per cent growth in profit and a final dividend per share of N2.70, bringing its total to N3 per share for the financial year under review.

According to the results, the tier one lenders profit after tax (PAT) rose to N201.44bn from N198.85bn in 2019. Its profit before tax (PBT) rose to N239.09bn from N231.71bn in 2019. Deposits from customers surged by 38.74 per cent to N3.51tn in 2020 from N2.53tn a year ago, while loans and advances to customers rose to N1.66tn from N1.50tn.

In the last five years, GT Bank has grown its total assets by 58.6 per cent from N3.116 trillion in 2016 to N4.944trillion in 2020; Profit Before tax rose 44.1 per cent from N165.136billion in 2016 to N238.095billion in 2020; total equity rose 62.3 per cent from N501.692billion in 2016 to N814.395billion.

As a result of its successes, many organizations have tried to model their operations after G T Bank. Its compact disposition appears to have yielded fruit. Some believe that the banks management style has even generated envy among its peers. Any time there is comparison among the banks, the argument tends to favour G T Bank more.

This has truly mystified its operations and brand name over the years. Curiously, the reputable Harvard Business School in United States of America (USA) and Crainfield Business School had as a result carried out a deep research on the effectiveness and uniqueness of the G T brand.

Its modest success has shown that quality actually pays in the long-run. This may be the reason why the bank has run a modest, focused, tight and qualitative organization. In fact, the bank believes in doing its own thing rather than join the fray of aggressive competition that pervades the Nigerian banking industry.

Access Bank

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 a significant 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).

According its audited financial statement submitted to the Nigeria Stock Exchange (NSE), the bank recorded gross earnings of N764.7 billion, up by 14 per cent from N666.8 billion in 2019.

Profit before tax (PBT) grew by 13 per cent to N125.9 billion from N111.9 billion, despite the high cost of operating an enlarged franchise and the increase in net impairment charge of near N43 billion arising principally from a Structured Trade Finance(STF) portfolio in the Access Bank UK.

According to the tier 1 lender, the STF impairment is one-off/COVID related and recoverable over the next 12-18 months against insurance cover from world class insurers.

Profit after tax (PAT), however, rose by same margin from N94.1 billion to N106 billion in 2020 on the back of a 32 per cent growth in operating income, which offsets the rise in impairment charges and operating expenses.


The CBN recently replaced the entire boards of FBN and FBNH, and reinstated the former executive directors and CEO, Dr. Adesola Adeduntan.
The CBN had also requested that FBN unwind certain exposures and divest from its participation in a non-permissible company, also pointing to potential corporate governance lapses at the bank.

However, Dr. Adeduntans reinstatement and the re-appointment of the other executive directors underscores the CBNs confidence in the existing management team to continue the turnaround of the third-largest banking group in Nigeria, which has total assets of Nigerian N7.7 trillion.

We are of the view that the CBNs historical approach has been more reactive than proactive, as illustrated by the Skye Bank episode. That said, recent actions, while disruptive in the near-term, may signal a more direct and possibly decisive supervisory approach to alleged failings in the management and governance of regulated institutions, it stated.

It noted that FBNs overall credit profile has gradually stabilised since 2016, with a capital adequacy ratio of 17 percent in 2020, as against a 15 percent minimum requirement.

Similarly, the banks asset quality indicators improved significantly, with Non-Performing Loans (NPLs) reducing to 7.7 percent in 2020, from 20-25 percent since 2016.
First Bank of Nigeria Holdings published its first quarter report for the period ended 31 March 2021.
The report shows that the Group achieved Gross Earnings of N136.575 billion in Q1 2021, down by 14.47% from N159.681 billion of Q1 2020.

FBNH reported profit after of N15.6 billion, down by 39.30% from N25.7 billion reported in Q1 2020.
Earnings per share (EPS) of the Holding Company dropped to 43 kobo from the EPS of 72 kobo in Q1 2020.
At the share price of N6.90, the P.E ratio of FBNH stands at 15.88x with earnings yield of 6.30%.

Fidelity Bank

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 banks 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.

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, Nigerias 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 most combustile headwinds in the history of the country this far.



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