Top banks renew earnings rivalry

• Access, UBA, Zenith, GTB, First Bank, others battle for top rank

By JULIUS ALAGBE

Top banks in the country have renewed their earnings rivalry as they battle for top position in the banking sector. This corporate rivalry has forced top bank chiefs to adopt various strategies to ensure they cut the big chunk of the pie available in the economy. The banks are Access, Zenith, GTB, UBA AND First Bank.

Specifically, the earnings season shows that in the nine months of financial year 2019, Access Bank Plc leads the ranking in terms of gross earnings, followed by Zenith International Bank Plc.

Despite macroeconomic and regulatory headwinds, these heavy balance sheet banks’ combined gross earnings for the financial year 2019 hit about N2.162 trillion. This represents a 2% increase when compare to about N2.125 trillion made by the banks in the comparable period in 2018.

Analysts however observed that Access Bank, Zenith Bank, First Bank of Nigeria Holdings, United Bank for Africa and Guaranty Trust Bank Plc competitive business and financial strengths differ base on size, focus and assets allocation. The results revealed that the banks’ ability to manage cost, operational efficiency and size of business transaction affected bottom line.

In the period, the top banks were able to convert 24.12% of their combined earnings as distributable profit. In the period, the five banks recorded N521.729 billion combined profit after tax. Meanwhile, a year ago, these Tier I banks combined earnings was about N2.125 trillion. Of the sum, 21.44% was converted to profit after tax which translated to N455.835 billion.

BusinessHallmark reported that in the first half of the year, these big balance sheet banks crowded out Tier II banks significantly in terms of size of deals, profitability. The big “5” accounted for more than 80% of the industry earnings, a situation that analysts attributed to difference in financial muscles and deals capabilities.

ACCESS, Zenith, FBNH ranked ahead in terms of gross earnings. However, in terms of profit, Zenith leads the pack followed by GTBank and then ACCESS. The rating on ability to convert revenues to profit, GTBank ranked ahead followed by Zenith Plc.

The analysis of the number also shows that Zenith ranked top in terms of share of the industry’s profit while GTBank came second, followed by ACCESS.

In their individual results for the 9 months of the financial year 2019, GTBank gross earnings pitched at N326.144 billion, which represents a 3% decline from N334.72 billion the bank achieved in the comparable period in 2018.

However, the bank raised profitability despite the fact that revenues nosedived. Its profit after tax settled at N146.99 billion, a 3% uptick when compare with N142.224 billion in similar period in 2018.

Zenith Plc.’s gross earnings increased by 3.5% from N474.61 billion to N491.268 billion at the end of 9 months in financial year 2019. The results show that the bank profit after tax also followed the same trend. Post tax profit expanded 4.5% year on year to N150.7 billion.

In the comparable period in 2018, Zenith Bank had raked in N144.2 billion.

UBA seems to be the most aggressive bank that increased gross earnings by a whopping 13.6% from N357.1 billion in September 2018 to N405.5 billion a year after. Meanwhile, at the bottom line, UBA profit after tax surged 32.3% from N61.6 billion to N81.6 billion due to lower impairment charge on credit losses booked in the period.

Also, FBNH’s gross earnings closed the period at N426.2 billion, having dropped marginally from N430.8 billion in the comparable period. At N51.7 billion, its profit after tax jerked up by 15.3% from N44.9 billion level attained in 2018.

ACCESS Bank gross earnings berthed at N513.655 billion at the end of 9 months period in financial year 2019. This represents 3% decline when compare to N528.744 billion the bank made in 2018.

Profit after tax however expanded by 44.23% from N62.911 billion to N90.739 billion in the period under review.

Among the big five banks under review, ACCESS Bank Plc accounted for 23.75% of the aggregated earnings, followed 22.71% share of the market by Zenith Bank Plc. While FBNH accounted for 19.71% of the total, UBA cut was 18.75% of the total earnings. The remaining 15.08% went to GTBank Plc.

The review of the combined profit after tax shows that the top banks raked in N521.729 billion in the 9months of financial year 2019. The numbers show that Zenith Bank Plc accounted for 28.88% of the Tier I banks profit after tax to lead the pack, followed closely by GTBank which accounted for 28.17% of the total profit.

ACCESS Bank Plc cut 17.39%, while UBA share of the pie was 15.64% and the lowest in the rank was FBNH which took 9.91% of the sum. Many of the Tier I banks with bulging revenue found it difficult to convert to profits. Analysts observed pressure on earnings from funding cost and the size of operating expenses.

GTBank maintained industry cost leadership as the bank was able to convert more than 45% of its gross earnings to profit after tax. Zenith bank came second in the rank; converted 30.67% of its total earnings to distributable profit.

For UBA, the Group was able to convert 20.12% of its gross earnings to distributable profit. ACCESS Bank achieved a conversion rate of 17.67% while FBNH converted 12.13% of its N426.2 billion to distributable profit in the period.