Experts call for caution as banks reap bountifully from charges


Despite the economic headwinds in the country which have made the real sector to struggle, Nigerian banks were able to improve their profitability in the third quarter of 2020, the financial results of the lenders have shown.
Analysts have maintained that the performance of the banks in Q3 2020 does not reflect the true state of the Nigerian economy, which slipped into recession in the third quarter, contracting -3.62% during this period, making its second consecutive quarters of contraction, having recorded negative growth of -6.1 per cent in the second quarter of the year.
“It is interesting that some of the banks are coming up with material improvement or increase in their third-quarter profits. It is a pleasant surprise because the operating environment has been seriously depressed with a lot of headwinds. Despite this, the banks are coming with this kind of result. While the banks are coming up with impressive reports, the other sectors such as the oil and gas, manufacturing, in fact, the productive economy, are not doing well. This means the banks are earning their income not from productive activities of the economy,” posits Mr David Adorin, Managing Director, HighCap Securities.
Mr Ayodele Akinwunmi, Relationship Manager, FSDH Merchant Bank, noted that a lot of the banks have invested in skill, because of this they are making money from non-interest activities.
“But when we look at these performances in real terms, they are not all appreciation, because inflation is over 14%. It means anyone that does not make up to 14% growth in profits, has not made profit in real terms,” he argued.

FBN Holdings grows post-tax by 31.71%
FBN Holdings, the parent company of Nigeria’s oldest lender, FirstBank, made one of the largest improvements in its bottom-line in the third quarter of 2020. It improved post-tax profit by 31.71 per cent to N68.16 billion during this period, compared with N51.75 billion it made in Q3 2020.
The Group raked in ₦439.3 billion as gross revenue during the period under review, which was 5.1 per cent higher than the ₦417.9 billion it earned in Q3 2019, buoyed by non-interest income which grew 50.0 per cent y-o-y to ₦127.0 billion, despite 5.3 per cent y-o-y decline in net interest income to ₦192.7 billion.
FBNH’s operating income was better by 10.9 per cent to ₦319.7 billion instead of ₦288.2 billion it made as of September 2019, while operating expenses inched up 2.2 per cent y-o-y to ₦209.8 billion in the first nine months of this year.
The poor state of the Nigerian economy reflected in the volume of its risk assets which went bad in Q3 2020 as it had to make ₦46.7 billion provisions as impairment charge, which was 64.0 per cent higher than ₦28.5 billion it set aside for this purpose in the reversed period last year.
The financial group saw its total assets grew 16.8 per cent between December 2019 and September this year to ₦7.2 trillion with loans and advances also improving 10.9 per cent this time to ₦1.9 trillion.
Also, customer deposits rose 15.2 per cent to ₦4.6 trillion compared with ₦4.0 trillion in December 2019, which helped take its total liabilities up by 17.8 per cent year-to-date to ₦6.5 trillion.
Its post-tax return on average equity stood at 13.2% (Sept 2019: 12.2%), while post-tax return on average assets was 1.4% (September 2019: 1.2%).
Net-interest margin dipped to 6.6% from 7.0% in Q3 2019, while Cost to income ratio also declined to 65.6% (Sept 2019: 71.2%) and Nonperforming loan ratio improved to 8.8% (December 2019: 9.9%), which was still above the 5 per cent regulatory threshold and FirstBank Nigeria’s Basel 2 Capital Adequacy Ratio bettered to 15.7% from 15.5% in December 2019.
Commenting on the results, U.K. Eke, the Group Managing Director of FBNHoldings said: “In the quarter under review, there was a gradual relaxation of the lockdown and measured resumption of economic activities. Our nine months financial results validate our investment to diversify revenue towards non-capital consuming transactions and non-funding transactions. This has broadened our earnings base as we continue to innovate and extend our proposition to the customers through electronic banking offerings.
“Despite the challenging operating environment, our results reaffirm our resilience, focus on enhancing shareholder value and capacity to deliver on long-term goals. The steady growth in our performance with profit after tax up 31.7% y-o-y reflects the strength of our organisation to continually navigate the tough operating market conditions.”
He added that the group will continue to keep tight control on risk management, while growing and diversifying its loan book, ensuring that the non-performing loan ratio for its vintage book remains at a single digit.
“Similarly, and in line with our strategic objective, operational efficiency remains a key focus even within the high inflationary environment. Going forward, our focus is to consolidate our leading position through our digital offerings and remain nimble to take advantage of emerging opportunities as we propel our performance for enhanced profitability,” Eke concluded.
On his part, Dr Adesola Adeduntan, Chief Executive Officer, FirstBank said:
“The commercial banking group increased its y-o-y growth in gross earnings and profit before tax by 5.0% and 9.3% respectively despite varying degrees of challenges in the operating environment. As the premier and leading financial inclusion service provider, we continued to provide services to our customers with minimal disruption in a safe environment, supported by seamless transactions through our increasing agent banking network and digital platforms (FirstMobile and USSD). The number of FirstBank Agents now 75,996, an increase of 28.4% over the last quarter.
“As we focus on strengthening our competitive position, we recently and successfully issued a US$350 million 144A /RegS 5-year senior unsecured Eurobond. This represents the First Bank Eurobond transaction from Nigeria since 2017 as well as the first benchmark Eurobond issue from an African bank in 2020. The issue was oversubscribed reaffirming our solid credit story and ability to leverage our strong market access, despite the current market volatility and challenging macroeconomic environment. This is a testament to our focus and the trust that investors have in our franchise.
“Finally, we will continue to execute on our strategy to lead a digital vision whilst supporting our customers and further grow our businesses across geographical footprints.”

Access Bank PAT up 16%
Access Bank is one of Nigeria’s lenders that recorded better-than-expected performance in the first months of 2020, posting double digits growth in its post-tax profit. The Group’s profit-after-tax (PAT) went up 16 per cent to ₦102.3 billion in Q3 2020.
It grew Gross Earnings by 15 per cent y/y to ₦592.8bn in 9M 2020, (9M 2019: ₦513.7bn), driven by Non-Interest Income which increased by 100% y/y to ₦217.5bn (9M’19: ₦108.6bn), largely led by the huge improvement in trading income during this period. Transaction fees, Commissions and Other operating income accounted for 55% and Net trading income the balance of 45%. Although, interest Income declined by 7% y/y to ₦375.3bn in 9M 2020 (9M 2019; ₦405.0bn), due to the falling yield environment which saw income on investment securities drop by 15% y/y to ₦118.8billion. Meanwhile, interest and non interest income contributed 63% and 37% respectively to the gross revenue.
While Operating Income rose 29.2 per cent to ₦397.74 billion, correspondingly, operating expenses climbed 26 per cent to ₦246.87 billion in Q3 2020.
Access Bank impairment provision for bad loans rose by whopping 223 per cent y/y to ₦34.24 billion against ₦10.61 billion as Non-Performing Loans Ratio improved to 4.2 per cent in Q3 from 5.8 per cent as of December 2019, on the back of a ₦70.1billion write-off and cautious restructuring during the period.
The bank’s total grew 11 per cent YTD to ₦7.93trn from ₦7.14trn in December 2019 with Net Loans and Advances totalling ₦3.53trn as at September 2020 (December 2019: ₦3.06 trillion), while customer Deposits increased by 24% YTD to ₦5.26trn from ₦4.26trn at the end of last year. Low-cost deposits (Current Accounts and Savings Accounts) accounted for 62.4% of the deposit base and savings accounts deposits closed at ₦1.23trn as of September 2020.
It had a Net Interest Margin (NIM) of 5.1% in 9M 2020 from 6.8% in 9M 2019, while Average Cost of Funds (CoF) decreased 160bps y/y to 3.6% from 5.2% in 9M 2019 (Actual CoF in the period was 3.5%). The yield on Assets of 9.7%, down by 336bps y/y from 13.0% in 9M 2019. These are on the back of the declining yield environment.
Cost-to-Income Ratio (CIR) declined by 176bps y/y to 62.1% in 9M 2020 (9M 2019: 63.8%), despite the high cost of operation of the enlarged business scale.
“We continue to drive our cost transformation initiatives to minimize cost, which will result in improved efficiency ratios.
“Going into the last quarter of the year, our focus remains on consolidating our retail momentum and expanding our African footprint. The next two years will see updates with regards to the realization of synergies and actualization of the Bank’s strategic intent. Finally, I would like to thank our people and shareholders as we could not have achieved these feats without their dedication, commitment and support,” Herbert Wigwe, GMD/CEO, Access Bank, enthused.

Zenith Bank profit inches up 5.7%
Although Zenith Bank’s post-tax grew at a slower pace in this quarter when compared with the previous one, it was up 5.7 per cent to ₦159.32 billion in Q3 2020.
Revenue improved 4% year-on-year(y-o-y) to ₦509 billion, driven by non-interest income which rose to ₦173 billion from ₦157 billion recorded at the end of Q3 2019. Interest income dipped from ₦322 billion to ₦319 billion as interest expense and cost of funds declined 13% and 27% to close at ₦94 billion and 2.2% respectively.
Total deposits better by 20.93% to close at ₦5.2 trillion at the end of Q3 2020 up from ₦4.3 trillion in December 2019, dominated by low-cost deposits as retail deposits grew strongly to ₦1.7 trillion at the end of Q3 2020, underpinned by the continuous expansion and improvement of the Group’s digital platforms.
In terms of asset quality, the NPL ratio improved to 4.80% (FYE 2019: 4.95%), despite growing total loans by 14% y/y to ₦2.8 trillion during this period.
Meanwhile, Loan to deposit ratio was down by 1% to 57.1% from 57.8% in Q3 2019 and liquidity ratio weakened by 11 per cent to 50.8% from 57.3% in the corresponding period last year.
“Our liquidity and capital adequacy ratios (CAR), at 67.4% (Bank: 52.5%) and 21.5% respectively at the end of Q3 2020, remain above regulatory thresholds of 30.0% and 15.0% respectively. This gives headroom for providing support to businesses while creating risk assets opportunities in line with our credit risk management framework. Going into the final quarter of the year, we will remain resilient as we keep adapting to the headwinds in the operating environment and continue to deliver enhanced customers experience and stakeholders’ value,” the lender explained.

GTBank PAT shrinks 3.2% in Q3
GTBank is one of the big banks whose profit contracted Q3 2020. Its post-tax profit shrank 3.2 per cent to ₦142.28 billion during this period compared with ₦146.99 billion it made in Q3 2019.
It grew gross earnings marginally by 0.35% y/y to ₦325.28 billion, supported by the interest and similar incomes which rose 1.8% to ₦228.23 billion in 2020, but its revenue drive was hampered by 29.62% drop in fees and commissions income to ₦32.73 billion, despite net gains on investment securities by a whopping 96.89% during this period.
The group made a huge loan recovery in Q3 2020, resulting in a massive 2,709.95% net reversal on financial assets to ₦3.11 billion.
It scaled down interest and similar expenses by 24.9% to ₦38.49 billion, although personnel costs and other operating expenses increased 5.2% and 9.92% respectively in the first nine months of this year.
It gave out 4.5% more Loan to the tune of ₦1.57 trillion as its total assets grew by 21.68% to ₦4.57 trillion in Q3 2020 from ₦3.77 trillion in December last year, while deposits from customers increased by 26.01% to ₦3.303trillion in September 2020.
Its Capital Adequacy Ratio (CAR) stood at 23.9%, while Asset quality was sustained as NPL ratio and Cost of Risk (COR) closed at 6.5% and 0.6% in September 2020 from 6.5% and 0.3% in December 2019 respectively.
It Post-Tax Return on Equity (ROAE) of 26.3%, Post-Tax Return on Assets (ROAA) of 4.6%, and Cost to Income ratio of 40.2%.
Commenting on the financial results, the Managing Director/CEO of Guaranty Trust Bank Plc, Mr Segun Agbaje, said; “Our 3rd Quarter result is a reflection of how we have appropriately positioned our balance sheet to cope with current economic realities and the challenging business environment. It is also a testament to the enduring loyalty of our customers, the hard work and dedication of our staff and the unwavering support we continue to enjoy from all our stakeholders in our drive to deliver best-in-class financial services and superior and sustainable returns.”

UBA profit weakens 5.1% in Q3
UBA felt the impact of the tough operating environment as its post-tax profit growth was stunted, declining 5.51% to ₦77.13 billion in Q3 2020.
It succeeded in upping gross revenue by 5.94% to ₦453.67 billion, on the back of interest income that rose 6.46% to ₦317.14 billion, but was weakened by fees and commissions income and other operating revenue which waned 1.76% and 28.14% respectively during this period.
Net trading and foreign exchange income which jumped 28% to ₦45.72 billion in Q3 2020 was not enough, as the 72.23% in UBA’s impairment provision for bad risk assets it weighed down on its performance.
Even though interest expenses dropped by 5.66% to ₦131.12 billion, fees and commissions costs and personnel costs soared 23.8% and 20.67% respectively during the period under review.
The Group grew loans and advances by 12.94% to ₦2.45 trillion in Q3 2020, lifting its total assets by 29.98% to ₦7.06 trillion 9 months from ₦5.6 trillion as of December 2019.
It also made significant progress in mopping up cheap funds as deposits swelled 36.64% to ₦5.6 trillion compared with ₦4.1 trillion in December last year.

Fidelity Bank improves PAT 7% to N20.4bn Q3
The economic downturn in Nigeria could not hold Fidelity Bank financial performance down in Q3 2020 as it strengthened Profits After Tax (PAT) by 7% to N20.4 billion during this period from N19 billion the corresponding period last year.
This was despite gross revenue dipping 3.74% during the period under review to N155billion from N161.1billion in 2019, dragged down by fees and commissions income, which slipped -24.77% to ₦14.49 billion and interest income which lowered by 3.25% to ₦128.25 billion in Q3 2020.
Fidelity Bank’s performance was bolstered by its ability to cut down interest expenses by over a quarter to ₦57.47 billion, although personnel expenses and fees and commissions expenses rose 9.45% and 15.94% respectively during this time.
Total Assets grew by 21% to N2.5billion from N2.1billion in 2019; Customer Deposits were up by 22.3% to N1.5billion, while Net Loans rose by 12% to N1.27billion from N1.12bn December 2019.
The lender’s cost-to-revenue CoR was 1.2%; it had NPL of 4.7% in Q3 2020, capital adequacy ratios (CAR) of 18.2% and Liquidity Ratio (LR) of 35.0%.
“Our 9 months’ results reflect our resilient business model, particularly in a very challenging operating environment. We worked closely with our customers to gradually recover from the economic impact of the pandemic and the attendant effect of the lockdown” said Fidelity Bank CEO, Mr Nnamdi Okonkwo.
He explained that the drop in Gross Earnings was due to the decline in interest and similar income caused by lower yields and a drop in fee income. “Net fee income declined by N1.3bn largely due to a reduction in FX related income on account of the revaluation gains recorded in H1 2020.
He noted that the growth in Savings Deposits accounted for 40.2% of the total growth in Customer Deposits and Savings Deposits now represent 25.7% of total deposits, up from 22.3% in 2019, adding that the bank has disbursed over N50bn in intervention funds to customers in the last three months, in critical sectors to kick-start the economy after the lockdown and was quite optimistic about finishing the year strongly.
“We will continue to monitor and pro-actively manage evolving risks as business activities improve and look forward to delivering another set of resilient results in the remaining quarter of 2020FY”, Okonkwo said.

Wema Bank profit plunges by 35.32%
The poor state of the country’s economy dealt a serious blow on the performance of Wema Bank as its post-tax profit declining 35.32% to N2.64 billion in Q3 2020.
The bank’s revenue went down 10.80% year-on-year to N57.83 billion in Q3 2020 compared with N64.83 billion it generated in the prior period last year, weakened by interest income which was lower by -5.39% and net fees and commission income that waned 16.11% during this period.
Wema Bank’s financial performance in the first nine months of the year was also hobbled by the 14.91% rise to N1.87 billion in the provision it had to make for its toxic assets.
The revenue is generated from net trading activities was lower by 45.61% to N4.86 billion in Q3 2020 instead of N8.94 billion it raked in Q3 2019.
It succeeded in cutting interest expenses by 17.42% to N26.30 billion from N31.84 billion in Q3 2019 and reduced personnel costs marginally by -0.38% to N10.57 billion during this period.
The bank grew total deposits by 20.82% to N701.84 billion in Q3 2020 against N580.92 billion in Q3 20219 as the total liabilities improved by 22.23% to N807.60 billion.
Meanwhile, it gave out 24.39% more loans to the tune of N359.80 billion during this time as its total assets grew by 20.64% to N863.60 billion.
“2020 has been one of the most challenging years in recent history but the Bank remains resilient and has committed to keeping delivering value-added services to its customers and stakeholders as it has done over the last 75 years. The Bank expects to close the year in line with targets and expectations,” Mr Ademola Adebise, the bank’s Managing Director/Chief Executive Officer said.

Union Bank grows pretax profit by 2% in Q3 2020
Union Bank improved its profit before tax by ₦15.9billion in the first nine months of the year, compared with ₦15.5billion it made in the corresponding period in 2019, due its post-tax profit dipped marginally 0.81% to ₦15.07 in Q3 2020.
It grew gross earnings by 6% to ₦118.8bn (from ₦111.9bn in 9M 2019), driven by an increase in earning assets, while interest income went up marginally 1% to ₦85.4billion (from ₦84.9bn in 9M 2019).
Also, non-interest income rose 23% to ₦33.4bn instead of ₦27.1bn made in Q3 2019), supported by increased trading income and asset revaluation gains as net operating income increased 1% to ₦69.3bn (from ₦68.7bn in 9M 2019).
Meanwhile, operating expenses were flat at ₦53.4bn (from ₦53.2bn in 9M 2019), despite currency depreciation, inflationary pressures and unplanned Covid-19 related expenses.
The bank’s gross loans increased by 14% to ₦678.0billion (from ₦595.3bn in Dec 2019), while customer deposits went up 28% to ₦1.1trillion (from ₦886.3bn in Dec 2019).
Its Cost to Income Ratio (CIR) weakened by 1.2% to 77.1%, while Return on Average Equity (RoAE) and Return on Assets (ROA) stood at 8.6% and 1.1% during this period.
Commenting on the results, Emeka Emuwa, CEO said: “We reached a major milestone as our customer deposits crossed the ₦1 trillion mark this quarter, growing by 28% to ₦1.1 trillion compared to ₦886.3 billion at the end of 2019. This reflects increasing customer loyalty and our intense retail drive. Our customer acquisition strategy has been reinforced by the versatility of our digital platforms and channels which continue to drive customer satisfaction.
“The civil unrest which erupted in October and led to a significant destruction of property and small businesses across the country will have a real impact on business and the operating environment; and even as restrictions have eased, Covid-19 also remains a present threat in our day to day operations.
“Heading into the final stretch in 2020, our overarching commitment is to the health and wellbeing of our employees and the safety of our customers. Showing up for our communities is also at the core of who we are and therefore we will work with our partners and through our corporate citizenship initiatives to support individuals, businesses and our communities where we operate as we begin to rebuild and heal as a country.”
Chief Financial Officer, Joe Mbulu said: “Our operating expenses were relatively flat year-on-year at ₦53.4 billion, compared to ₦53.2 billion in 9M 2019 despite inflationary pressures on cost and higher regulatory costs. This reflects continuing to focus on cost management.
“Our asset quality continues to improve with Non-Performing Loans (NPLs) down to 3.6% from 5.8% as at December 2019, supported by ongoing efforts to diversify our loan book to include viable businesses and households. Our Capital Adequacy Ratio remains robust at 19.5%, well above the regulatory threshold.
“With the $40 million (USD) financing secured from the International Finance Corporation for on-lending to trade finance customers, we are continuing to expand our funding engagements with DFIs to support our strategic business initiatives.
“For the rest of the year, we remain focused on our business priorities in the face of the Covid-19 challenge and will continue to leverage increasing customer loyalty, stronger digital platforms and channels as well as solid risk management structure to deliver on our objectives.”

Sterling Bank profit wanes by 2.77% in Q3 2020
Sterling Bank was also caught in the web of the country’s depressed economy as its post-tax profit dipped 2.77% to ₦7.37 billion in Q3 2020.
Interest income was down by 6.72% to ₦88.69 billion from ₦95.08 billion because of revenues from Loan and advances to customers and debt instruments at amortised cost which slipped by 8.76% and 22.93% respectively during this period.
Net Fees and commissions income also shrank 26.21% to ₦7.87 billion in Q3 2020, weighed down by a huge 35.37% contraction in Fees and commissions revenue and e-business income that declined 15.56% during this period.
Sterling Bank, however, made a trading income of ₦7.1 billion for the third quarter ended September 30, 2020, compared with N1.9 billion for the corresponding period of 2019, representing an increase of 264.7 per cent and other operating improved 23.89 to ₦2.46 billion during this period.
While interest expenses were cut down 16.98% to ₦39.48 billion, personnel costs dipped 0.77%, but other operating expenses lowered by 4.84% in Q3 2020.
The lender’s performance was also slowed down by 148.11% rise to ₦9.7 billion which was set aside for credit loss expense on financial assets compared ₦3.91 billion in September 2019.
In his remarks, Mr Abubakar Suleiman, Managing Director and Chief Executive Officer (MD/CEO) of the bank said, “With economic activity picking up in the third quarter, following the gradual ease in the nationwide lockdown, we continued to leverage on our existing remote work policy to enhance workforce productivity while ensuring uninterrupted service delivery to both existing and new customers”.
The CEO said a 26.2% dip in fee income occasioned by the downward review of electronic banking fees, and slower loan origination due to the protracted lockdown was moderated by a 264.7% spike in trading income.
He said growth in the balance sheet was driven by a 26.5 per cent growth in low-cost funds, which saw the bank’s CASA mix improve to 71 per cent from 60 per cent, delivering a 6.6 per cent growth in customer deposits. Our cash and short-term balances increased in line with the higher regulatory reserves while interest income also declined by 6.7 per cent, which was offset by a 17.0 per cent decline in interest expense. This delivered a 120 bps drop in the cost of funds and, consequently, a 100-bps increase in net interest margin.
Suleiman noted that in terms of asset quality, “We proactively increased our cost of risk by 100 bps to 1.9%, while recording a marginal increase in NPL ratio to 2.9%, well below our target of 5%”
He explained that the decline in OPEX was achieved by moderating administrative expenses despite growth in other operating expenses, including AMCON and insurance fees
The CEO said the bank was able to maintain a strong capital and liquidity position of 16.1 per cent and 32.5 per cent respectively above the regulatory benchmark, adding that overall the bank delivered a profit after tax of N7.37 billion for the 9-month period.

Unity Bank posts 6% growth in profit in Q3 2020
Unity Bank put up an impressive performance in the first nine months of the year despite the tough operating environment, growing post-tax profit by 6% to ₦590.37 billion during this period.
Gross earnings expanded by 3% to ₦11.04 billion in Q3 2020, lifted by fee and commission income which went up by 4% to ₦656.52 million and Net Trading Income which improved 4% to ₦446.67 million during the period under review.
Interest and similar expenses rose by 2% to ₦5.25 billion in Q3 2020, personnel expenses increased by 9% to ₦2.62 billion, but other operating expenses went down 6% to ₦1.97 billion.
It made a ₦100.79 million reversal in credit loss, compared with ₦193.41 million the bank made it the prior period last year.
Unity Bank’s risk appetite was higher in Q3 2020 with loans and advances increasing 27% to ₦131.85 billion from ₦104.02 billion in December 2019 as its total assets ascended by 44% to ₦420.87billion in the period under review.
Deposits from customers also went up 29% to ₦332.36 billion as of September 2020.
Ayodele of FSDH Merchant Bank and Adorin of Highcap Securities projected that the bank’s performance would further improve in the last quarter of the year due to increased earning that usually comes with the end of the year. They also noted the news that vaccines against coronavirus may soon be developed may likewise propel oil prices up.


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