The Banker Magazine recently named Zenith Bank the biggest bank in Nigeria out of the 8 Nigerians banks that featured in top 25 in Africa. Zenith, the highest ranked Nigerian Bank was 7th in Africa and 322 in the World. The report used Tier One Capital as their basis for the ranking. Tier 1 capital basically includes the Core Equity of the bank such as Revenue Reserves, Shareholders Capital (including share premiums), retained earnings. This is the money that belongs to the bank’s shareholders. This result also holds true if you look at the Net Assets of Nigerian banks as at year end 2011. Zenith for example has a net asset of N380.3m whilst First Bank and GTB had N365.4m and N238.7m respectively. But if it where to be based on Total Asset or indeed Total Deposits, then First Bank comes tops. But this is about Net Assest which I believe is the true yardstick for knowing which bank is the biggest.
What does this all mean?
For Zenith Bank it means a whole lot. By being the bank with the most shareholder funds (Net Assets), their strength and ability to take risk and withstand downturns is unparalleled at least for now. For bank depositors, this does nothing more but to give them a sense of comfort that their money is at least in good hands. If Zenith, GTB, UBA, First Bank, Access Bank and Skye Bank are amongst the top 25 banks in Africa in terms of Tier One Capital, then one might as well concluded that they are a safe bet to deposit your money. For Investors though, I see little effect. Their shareholders may feel a sense of content that they have investments in the most robust bank in the country. However, this doesn’t translate to returns on equity. Whats the point having so much equity yet investors can not maximize returns from it. On that basis, GTB comes first, having returned 23.7% almost twice the return of Zenith at 12.2%. First Bank was 13.2% and Access Bank 9%.