CBN building


Underscoring the yet troubling straits which many financial services players are yet contending with, the half year results of the leading banks in the country, including GT Bank Plc, Zenith Bank Plc and FBN Holdings, reveal a surprisingly sluggish growth trajectory. This is more so as the results stand in almost sharp contrast to the first quarter performance in which banks achieved relatively higher performance and profit margins.

Indeed, banks are usually not comfortable when profit margins begin to go thin. And with the management boards of leading financial institutions not only experiencing small profit margins at the moment, the situation is clearly constituting a huge threat to the banks which have to operate in what is looking like a pre-cast harsh macro-economic environment for at least the next four years. Indeed, even more ominous is the fact that some of the affected banks may only have merely escaped posting profit declines and red paints in their books at the moment, with dire foreboding of what yet lies ahead for them even as the dominant operational headwinds continue to look troubling.

At a time like this, managers of financial institutions seem to remember with nostalgia the days when profit margins stood on the average of between 15and 20 percent. Those good days, so to say appear to have now gone. This time around things have changed. For instance, the average profit margin for Zenith Bank in the last five years stood at 16 per cent. This is no mean performance. The bank achieved a profit margin growth of 21 per cent in 2015 but dropped to a lower 17 per cent in the very tumultuous year 2016. Picking up steam in the succeeding year, Zenith Bank’s profit jumped by 42.4 per cent in 2017. But clearly this was a hard nut to follow with an encore as the bank’s profit margins slowed to a less spectacular 7.8 per cent in 2018 and 8.7 per cent in 2019.

Similarly, FBN Holdings recorded a decline in profit margin of 11.9 per cent in 2016; even as it also declined by a higher margin of 22.36 per cent in 2017. While the Elephant achieved a profit margin of 9 per cent in 2018, its profit margin closed slower at 2. 55 per cent in the half year ended June 30, 2019.

On its part, G T Bank has been touted as the most profitable bank in Nigeria over the time. In 2016, the Bank achieved a strong profit margin of 35.7 per cent. It also achieved a strong profit before tax of 17.9 per cent in 2017. While its profit margin slowed to 8.4 per cent in 2018, it went slower by 5.6 per cent in 2019.

The situation with several other banks was not exactly dissimilar. While Sterling Bank’s profit margin for 2019 declined 5.6 per cent that of Unity Bank rose 96 per cent for the half year ended 2019. And while shareholders await other results, Jaiz Bank grew its profit by 978 per cent.

Analysts believe the banks have done fairly well and should even be praised for their little achievements, so to say, in an environment as harsh as that of Nigeria where there is high mortality rate for businesses.

This is more so as industry commentators hold that the year 2019 has not been favourable to businesses in Nigeria. Inflation has hovered between 11.4 per cent and 12 per cent having retraced its steps from the 18 per cent it attained in 2016. The economy has remained weak at a stuttering growth rate of 2.01 per cent; lending rate hovers between 28 and 32 per cent depending on the financial institution; deteriorating insecurity has become a scare point to even domestic investors let alone foreign investors who have remained on the fringes to watch the drama of our politics fraught with deceit. Equally troubling are factors like the poor implementation of the budget where over 70 per cent is deployed for recurrent expenditure with very little left for capital projects; the shrinking economy that has left consumers with very little disposable income to invest; and the Central Bank of Nigeria maintaining its hold on the monetary policy rate, leaving the MPR at 13.50 per cent, and the CRR and liquidity ratio at 22.5 per cent and 30 per cent respectively. These, analysts say, have also not augured well for banks in terms of creating risk assets at competitive rates.

Poring through annual reports of the bank at the close of year 2018, almost all the banks acknowledged that the challenges in the operating environment has not been favourable to banking business in Nigeria.

Managing Director of HIGH CAP Securities limited, Mr. David Adonri reckons that expecting high profit margins in a highly volatile environment is not realistic.

‘’The nature of the business environment has not been favourable. The environment has been hostile. That is why the profit margins are lower. When the environment is harsh the room for business activities that would enhance profitability of business is slow and lower’’, he said.

Contributing, a Lagos based analyst, Mr. Johnson Chukwu who is the Group CEO, Cowry Asset Management Company Limited told Business Hallmark that in a dynamic industry as that which operates in the banking sector, no industry leader maintains a permanent position.

“It is difficult for anybody to say with certainty that any industry leader that has lost its leading position can get it back in a short time,’’ said Mr. Chukwu.

He added that banks cannot perform magic in an economy that has been in a very slow recovery phase. According to him, “we also have seen a heightened level of insecurity which is negatively affecting the level of economic activities in the country. Again the banks are being buffeted by some of the regulatory directives that impinge on their performance.’’

On his part, the Group Managing Director, Afrinvest West Africa Limited, Mr. Ike Chioke, told Business Hallmark that it would fool hardy to expect improved top and bottom lines in an economy that is down.

‘’When there is massive insecurity, companies that you ordinarily think are not affected might find out that their distribution lines are cut. They can no longer go to areas they used to. That means there will be reduction in their income. Consequentially, when that income reduces, the money being aggregated in the banks is reducing. And of course, for capital market operators, the money available for us to invest or manage is much reduced. So, we are all feeling the impact of a difficult economy’’, Ike Chioke said.

He also painted a gloomy picture of the economy and how it affects businesses in Nigeria. He explained,

‘’Well, like every other company in Nigeria we are a victim of the environment. It’s like a ship in the sea. If the sea is calm and benign you can sail more swiftly. And you can get to your destination quicker. But if the sea is rough and turbulent, you would be struggling to move. You are afloat but you may not be moving or making much gain. So, I think Afrinvest, like many other companies in Nigeria, is suffering from the general slower-than-normal economic growth rate’’,

Indeed, the banking industry seems to be operating in one of the toughest times in Nigeria given the variegated challenges in both the macro and micro environments. And there clearly does not appear to be any respite in the days ahead.

Results of some of the banks:

GTBank posts Profit before Tax of ₦115.8Billion in Half year

With a profit before tax of N115.8billion for the half year ended June 30, GT Bank displayed strength and superiority over its performance in the corresponding period of 2018. The bank’s profit before tax therefore grew 5.6 per cent over the N109.6 billion it had secured in 2018.

The bank’s loan book grew by 1.0% from ₦1.262trillion recorded as at December 2018 to ₦1.274trillion in June 2019 and customer deposits increased by 6.3% to ₦2.418trillion from ₦2.274trillion in December 2018.

The half year result shows positive growth across key financial metrics and reflects GTBank’s leading position as one of the best managed financial institutions in Africa.

The Bank closed the half year ended June 2019 with Total Assets of ₦3.598trillion and Shareholders’ Funds of ₦603.0Billion. In terms of Asset quality, NPL ratio and Cost of Risk improved to 6.8% and 0.2% in June 2019 from 7.3% and 0.3% in December 2018 respectively. Overall, asset quality remains stable with adequate coverage of 84.7%, while Capital remains strong with CAR of 23.5%. On the backdrop of this result, Return on Equity (ROAE) and Return on Assets (ROAA) stood at 33.7% and 5.8% respectively. The Bank is proposing an interim dividend of 30kobo per ordinary share of 50 kobo each for period ended June 30, 2019.

Commenting on the financial results, the Chief Executive Officer of Guaranty Trust Bank plc, Segun Agbaje, said; “We have delivered a good result in spite of a challenging market, characterized by varying degrees of uncertainty and a rapidly changing competitive landscape. Our strong financial performance is underpinned by our unwavering focus on delivering value for our shareholders and reimagining the role we play in our customers’ lives.”

He further stated that “In a rapidly changing world and increasingly unpredictable environment, we are committed to building a long-term business that is both nimble and focused on flawless execution. The progress that we have made over the past six months demonstrates that we have the right strategy and the dedicated team to deliver for all our stakeholders, even in difficult conditions.”

The Bank has continued to report the best financial ratios for a Financial Institution in the industry with a return on equity (ROE) of 33.7% and a cost to income ratio of 37.6% evidencing the efficient management of the banks’ assets. These ratios are a testament to the competent and experienced management and work-force, efficient balance sheet structure and operational efficiency of the Bank. In recognition of the Bank’s 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 these include Africa’s Best Bank and Best Bank in Nigeria from Euromoney Magazine, and Best Banking Group and Best Retail Bank by World Finance Magazine


Despite the slow recovery in the economy, Zenith Bank Plc posted a profit before tax (PBT) of N111.7billion and proposed interim dividend of 30 kobo per share for the half-year ended June 2019.

The bank’s audited half year financial results which were made public on the floor of the Nigerian Stock Exchange recently showed improved performance in key financial indicators. Details of the results revealed that its Gross earnings grew by three percent from N322.2 billion to N 331.6 billion driven by a significant growth of 24 percent (YoY) in non-interest income from N88.6 billion in H1 2018 to N109.7 billion in H1 2019.

According to a statement from the bank, “In particular, fees from electronic products increased by N 17 billion (168 percent) from N10 billion in H1 2018 to N27 billion in H1 2019, demonstrating significant progress in our retail banking initiatives.

“This top-line growth filtered through to the bottom-line as Profit Before Tax (PBT) increased toN111.7 billion reflecting a four percent growth over N107.4 billion reported in H1 2018 with earnings per share (EPS) increasing by nine percent to N2.83 in H1 2019 from N 2.60 compared to the prior period.

At the close of business on June 30, 2019, the Group’s total deposit increased by 3% with retail deposits growing by N267 billion (31 percent), from N861 billion to close at N1.1 trillion. “Despite the growth in our deposit base, we optimized interest expense leading to a four percent reduction from N74.7 billion to N72.1 billion due to the Group’s improved funding mix and our profound treasury management skills.

“Our robust risk management ensured that our absolute Gross Non-Performing Loans (NPLs) remained flat. However, the marginal movement in NPL ratio was as a result of the three percent reduction in our loan book from N2.02 trillion as at December 2018 to N1.95 trillion at the end of the period. The statement added, “Going into the second half of the year, we will continue to consolidate our leadership in the corporate space while our retail banking drive will continue unabated.

Sterling Bank’s profit drops 5.7 per cent

Sterling Bank’s profit after tax for the half year (HI) period ended June 30, 2019 declined -8.9 percent to N5.66 billion from N6.21 billion in the corresponding period of last year 2018.

This is even as profit before tax profit dropped 5.7 percent to N6.00 billion from N6.36 billion achieved in the same period of 2018.

Similarly, the Gross earnings of Sterling Bank dropped from N77.60 billion in 2018 HI to N74.49 billion in 2019; representing a decline of 4.0 percent

“Underlying our half year performance was a concerted effort in improving the quality of our funding base, increasingly through digital products and initiatives. Though top line earnings were impacted by a selective approach to lending, the Bank remained focused on building a sustainable business model and continued to see considerable improvement across business lines, particularly our retail & Consumer and digital & transactional banking businesses. Overall the Bank recorded a 5.5% improvement in operating income and a profit after tax of N5.66 billion,” Abubakar Suleiman, chief executive officer of the bank said in a statement.


As for FBNH, the Elephant has roared again, proving its strength in the half year performance as it posted N294.2 billion gross earnings for the half-year ended June 30, 2019,representing 0.3 per cent year-on-year rise.

FBNH, Nigeria’s foremost financial holding company’s net-interest income stood at N146.7 billion, down two per cent from N149.6 billion in June 2018.

“Non-interest income of N63.6 billion, up 3.6 per cent year-on-year (as against N61.3 billion in June 2018; Operating income of N210.3 billion was achieved, down 0.3 per cent while impairment charge for credit losses of N22.1 billion, down 58.1 per cent. Also, operating expenses stood at N148.3 billion, up 24.3 per cent; Profit before tax of N39.9 billion, up 2.6 per cent and Profit after tax N31.7 billion, down 5.4 per cent,” the group said .

An analysis of its financial position showed that total assets stood at N5.7 trillion, up 1.8 per cent year-to-date, customer deposits of N3.6 trillion, up 2.8 per cent while customer loans loans and advances (net) of N1.74 trillion, up 3.5 per cent.

Its none performance loans ratio stood at 14.5 per cent among other performance milestones.

Its Group Managing Director, UK Eke, said: “Despite the difficult operating environment, we remain resolute in delivering on our guidance across key metrics including our commitment towards a single digit NPL ratio by the end of year, as evidenced by the reduction in NPLs from the last quarter.”

“Essentially, Atlantic Energy – our largest NPL, was written off, translating into a decline in the NPL ratio from 25.9 per cent in December 2018 to 14.5 per cent as at June 2019, a step that brings us closer to our fiscal year 2019 target and creates more headroom for quality asset growth.”

“We are confident in the Group’s ability to deliver stronger results sustainably as we execute our strategy and unlock earnings potential from recent investments in innovation and digital transformation. This will enhance our future earnings capacity and drive operational efficiencies that will enable the generation of superior returns to our shareholders.”

Chief Executive Officer of FirstBank and Subsidiaries, Adesola Adeduntan, said: “In line with our commitment to address the legacy asset quality challenges, exposure to Atlantic Energy was written off in the quarter.”

Going forward, some analysts reckon that the country’s risk position presently is very high and may not conduce to another boom in the banking industry for some time or indeed of some other sectors of the economy

‘’Nigeria has the largest economy in Africa – in close competition with South Africa – and a population of 200 million people. The country has the 30th largest economy in the world based on GDP volume. However, Nigeria’s economy is highly dependent on oil revenues and is therefore very vulnerable to variation in crude oil prices and production level. Nigeria emerged from a recession last year, so growth remains fragile and sectoral growth patterns are still unstable. In 2018, the oil sector recorded a negative growth rate of -1.62%, and non-oil revenue came in lower than expected, in spite of reforms to improve the economy. Still, the economy grew slightly under 2% in 2018, largely driven by the non-oil industry – particularly mining, quarrying, and manufacturing – and the service sector. That rate is expected to continue in the next couple of years, as the GDP is projected to grow by 2.3% in 2019 and 2.5% in 2020, backed by the implementation of the Economic Recovery and Growth Plan’’.

At a time like this therefore, the path of wisdom simply remains that which the sages would always counsel: ‘please keep those seatbelts fastened, until the storms roll over.’ A word they also say, is enough for the wise.