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Top banks defy headwinds, show strength in Q1’23

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BY EMEKA EJERE

Despite the highly challenging global economic and business environment, unaudited results of the tier 1 banks so far released on the Nigerian bourse showed that the lenders have begun the year on positive notes, with signs of further improvement going forward.

The banks, like businesses in other sectors of the economy, are grappling with harsh macro-economic environment, with, among others, headline inflation rate rising to 21.91% in February 2023 compared to 21.82% recorded in the preceding month of January.

The National Bureau of Statistics (NBS), said looking at the trend, the February 2023 inflation rate showed an increase of 0.09% points when compared to January 2023 headline inflation rate.

This is even as high insecurity caused by the Boko Haram insurgents, kidnappers and bandits continues to drive away both domestic and foreign investors.

Besides, many believe that the effects of the monetary policy stands of the Central Bank of Nigeria (CBN) are suffocating the banks. According to reports, over N11 trillion has been debited from commercial banks’ deposits since 2019 for failing to meet CBN’s Cash Reserve Requirement (CRR) and Loan to Deposit Ratio (LDR) policies

Currently, banks are required to leave 32.5 per cent of their liquidity with the CBN, one of the ways through which the apex bank regulates the country’s money supply in order to keep inflationary pressure in check.

The CBN has also raised its benchmark interest rate, also known as the monetary policy rate (MPR), to 18 percent from 11.5 percent in May 2022.

Zenith Bank

Zenith Bank Plc grew its gross earnings by 41 per cent from N191.5bn in the first quarter of 2022 to N270bn in Q1 2023 ended 31st March 2023.

The unaudited statement indicated that the double-digit growth in the topline also boosted the bottom line, with the Group experiencing a 27 per cent year-on-year increase in profit before tax from N68bn in Q1 2022 to N86.6 bn in Q1 2023. Profit after tax also grew by 13 per cent from N58.2 bn to N66 bn during the same period.

The growth in gross earnings was propelled by substantial increases in both interest income and non-interest income. Interest income surged by 52 per cent from N126.4 bn in Q1 2022 to N191.6 bn  in Q1 2023, while non-interest income expanded by 27 per cent from N57.2 bn to N72.8 bn.

The lender attributed the growth in interest income to the impact of risk asset repricing, while the increase in non-interest income primarily resulted from loan recoveries and foreign currency revaluation gains.

Regarding efficiency, the cost-to-income ratio improved from 55 per cent to 53.4 per cent in the current period, supported by a bolstered income line. The cost of risk also moderated from 0.8 per cent to 0.7 per cent during the same period due to an enlarged loan book.

However, the cost of funding doubled YoY from 1.3 per cent in Q1 2022 to 2.7 per cent in Q1 2023, owing to a considerable spike in interest rates between both periods as interest expense grew from N25.8 bn in Q1 2022 to N70.8 bn in Q1 2023. This impacted the net interest margin, which reduced from 7.3 per cent to 6.9 per cent over the same period.

Total assets expanded by nine per cent from N12.29 tn in December 2022 to N13.36 tn in March 2023, primarily driven by growth in customer deposits and other funding sources, such as borrowings. Customer deposits increased by two per cent from N8.98 tn in December 2022 to N9.14 tn in March 2023.

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Loans and advances also experienced marginal growth of one per cent from N4.12 tn in December 2022 to N4.15 tn in March 2023 as customers continued to adjust to the full impact of higher rates on risk assets.

Both the capital adequacy and liquidity ratios remained robust at 19.5 per cent and 72 per cent, respectively, with both prudential ratios comfortably exceeding regulatory thresholds.

The group added that it would maintain its focus on sustainable growth across all business segments as it restructures into a holding company, introduces new verticals to its businesses, and expands into new frontiers.

Access Bank

Access Holding’s Q1 2023 unaudited numbers showed a 46.4% y/y growth in Interest Income driven by growth in both Interest Income on Net Loans and yields on investment securities.

Net Loans declined marginally in Q1, down 1.2% in March compared with December 2022. Interest Expense also grew strongly, up 84.1% y/y driven by strong growth in Interest Expense on deposits from financial institutions (up 152.2% y/y) and deposits from customers (up 82.2% y/y).  Overall, Net Interest Income grew moderately, up 9.1% y/y. Customer Deposits were up 7.5% in Q1 2023.

Net Fee and Commission grew slightly, up 5.8% y/y. Some Fee and Commission Income lines that showed growth were credit related fees and commissions (up 6.3% y/y), commission on other financial services (up 41.4% y/y) and commission on bills and letters of credit (up 52.4% y/y).

Other Income (Net (loss)/gains on financial instruments at fair value, Net foreign exchange gain/(loss), Net loss on fair value hedge (Hedging ineffectiveness), and Other Operating Income) was up 66.5% y/y to N109.4bn in Q1 2023 from N65.7bn in Q1 2022. The group reported Net Foreign Exchange gain of N112.4bn in Q1 2023 compared with N85.8bn in Q1 2022.

Overall, PBT was up 24.5% y/y while Net Profits also grew 23.9% y/y bringing Q1 2023 annualised RoAE to 23.3%. The Group reports Capital Adequacy Ratio under Basel II guidelines of 22.38%.
UBA

Also, United Bank for Africa (UBA) Plc, in its unaudited financial results showed impressive performance across major indices.
The statement showed that interest income rose significantly to N191.88 billion from N125.08 billion recorded in the 2022 financial year, representing 53.40% growth.

The financial results further showed that the bank reported a 19.62% growth in turnover from N463.41 million in 2022 to N554.34 million in 2023.

UBA recorded a profit before tax growth of 37.97%, to close the quarter under review at N61.37 billion, from N44.48 billion recorded in 2022.

Profit after tax (PAT) grew by 29.16% to N53.59 billion in Q1 2023, compared to N41.49 billion recorded the year before.

“The growth in gross earnings is on the strength of increase in both interest income and non-interest income while growth in total asset is attributable to increased deposits due to aggressive deposit mobilization drive that resulted in a 10.5% growth in customer deposit in the first quarter.” Executive Director, Finance and Risk at UBA, Ugo Nwaghodoh, noted.

GTCO

Similarly, Guaranty Trust Holding Company Plc (GTCO) published its first quarter report for the period ended 31 March 2023, showing year on year growth in the company’s top line and bottom line figures.

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The Financial Institution achieved Gross Earnings of N158.093 billion, up by 32.19% from N119.593 achieved the previous year.
Profit after tax grew year on year by 34.62% to N58.167 billion from N43.208 reported in Q1 2022. Earnings per share of GTCO for the period under review stands at N1.98.
At the share price of N24.85, the P/E ratio of GTCO stands at 12.57x with the earnings yield of 7.95%.

Ecobank

However, Ecobank Group Plc.’s profit slumped by 5% year on year to $88 million in the first quarter of 2023 from $92 million reported in the comparable period in 2022, according to a document submitted to regulators.

In the period under review, the financial service group’s net revenue settled at $483 million, representing an increase of 11%, driven by higher rates, market volatility, and underlying client activity in foreign currency sales, trade and cash management.

Detail from its financial scorecard showed that Ecobank group profits available to shareholders also declined to $63 million versus $64 million in the first quarter of 2022.

Management attributes the slight decrease in attributable profits of 2% to the net impact of $26 million on Ghana’s domestic debt financial securities. The deal includes the exchange of old bonds with new ones under the Government of Ghana’s domestic debt exchange programme.

However, Group Chief Executive Jeremy Awori said Q1 results still reflect the resilience of Ecobank’s diversified business model, efficiency, and stability.

Awori said, “Our results for the first quarter of 2023 showed progress despite the challenging global and regional macroeconomic environment.

“Once again, we have demonstrated the resilience of our pan-African diversified business model, efficiency, balance sheet stability, deep customer relationships and the hard work of our 14,000+ Ecobankers.

“Net revenues grew 11%, or 34% if you strip out the effects of translating the performances of our affiliates in their local currencies into US dollars, with revenue momentum robust across all our businesses.

“As a result, we generated a return on tangible shareholders’ equity of 19.5%. Furthermore, continued efficiency gains catalysed the growth in pre-provision, pre-tax operating profits by 13%, a key metric for assessing the Company’s earnings power.

“However, profits before tax at $125 million were flat due to currency movements but up 31% at constant currency.

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1,113 Comments

1,113 Comments

  1. Variable Home Loan Rates

    May 2, 2023 at 4:21 am

    Thanks for sharing this awesome blog about top banks. This is truly amazing.

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