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Financial Services

Exclusive: Best bank in Nigeria judging by the numbers 

Using several well-known metrics, we track Banking sector performance.

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Best bank in Nigeria judging by the numbers 

The Nigerian Banking sector is one of the most competitive sectors in the Nigerian economy and perhaps the most profitable. Despite having about 23 deposit money banks in the country, only a dozen are listed on the Nigerian Stock Exchange (NSE).

At Nairametrics, we track Banking sector performance regularly, using several well-known metrics. Most of the data can be found in the financial statements of the banks within our repository of reports. While we track all banks, the following banks are included in our universe of measuring financial performance. They are Access Bank, GT Bank, Fidelity Bank, FCMB, Sterling Bank, FBNH, Union Bank, Zenith Bank, UBA, Stanbic IBTC and Wema Bank.

In this report, we take a cursory look at the performance of listed banks in Nigeria based on six (6) metrics, these include Total Assets, Net Assets, Total Deposits, Profit After Tax, Return on Equity and Return on Total Assets.

READ ALSO: Report identifies banks expected to raise equity after COVID-19 flattens

Best Banks by Total Assets

In this case, banking assets include equity plus bank deposits. According to the data, 11 of the listed banks reported a combined total asset of N45.4 trillion as at the second quarter of 2020.

GTBank 728 x 90

This represents a 7.1% rise from total assets of N42.4 trillion as at June 2019. Growth in Total Assets is indicative of how strong our financial institutions are, particularly banks.

So, who are the leaders?

First Position – Access Bank N7.76 trillion

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Second Position– Zenith Bank – N7.58 trillion

Third Position – FBNH N7.13 trillion

Fourth Position – UBA N6.78 trillion

Upshots – Access Bank has maintained the number one position since 2019 after overtaking Zenith Bank following its merger with Diamond bank. Compared with the previous corresponding year, the assets of these banks dipped; with Zenith recording the highest growth representing 28.50 % from N5.89 trillion to N7.58 trillion, and FBHN also grew its assets by 28%. It is also important to note that the assets of these four banks make up more than half the entire total assets in the Banking sector. Suffice to say these are indeed big banks.

READ: Zenith Bank’s Profit After Tax in H1,2020 rises by 16.8% to N103.8 billion

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Net Assets

Banks’ net assets represent the total equity or shareholders’ funds of all the banks on our list. It includes the bank’s share capital, reserves, and its retained earnings in a period. The net asset is a very strong metric for measuring how strong banks are and it is also used by the CBN in assessing the Banking sector’s ability to withstand credit losses.

Stanbic IBTC

We observed that at the end of Q2 2020, bank net assets rose from N4.1 trillion at the end of June 2019 to N4.9 trillion in June 2020. This presents an 18.7% rise.

The top 4 by Net Assets

First Position – Zenith Bank, N998.9 billion

Second Position – GT Bank, N720.9 billion

Third Position – FBNH, N704.0 billion

Fourth Position – Access Bank, N670.3 billion

Upshots: We noticed a sharp rise in in the Net Assets of both FBNH (26%) and Zenith (20.7%). Year on Year, GT Bank also grew its net assets by 19.6%.

READ: Access Bank posts Profit Before Tax of N74.31 billion in H1 2020

Customer Deposits

Customer deposits are perhaps one of the most competitive banks’ performance metrics to track. The more deposits a bank has the more money it can make. In a country where a lot of cash remains outside the banking system, how well a bank can mobilize deposits from its customers shows how well it can compete in a very aggressive market.

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Analysis of the data collected showed that total banks’ deposits increased from N22.2 trillion in the corresponding quarter of 2019 to N27.6 trillion in the second quarter of 2020. This implies a 9.4% increase.

Top banks based on customer deposits

First Position – Zenith Bank, N4.9 trillion

Second Position – UBA, N4.8 trillion

Third Position – Access Bank, N4.6 trillion

Fourth Position – FBNH. N4.3 trillion

Upshots: Compared with the corresponding previous quarter, UBA’s total deposits rose sharply by 36.75% to N4.8 trillion in the second quarter of 2020. Zenith also increased by 29% and FBNH by 22% in the same period.

READ: Jim Ovia: From a clerk to founder of Nigeria’s most profitable bank

Profits After Tax

Corporate Profits are often viewed positively or negatively depending on how you view the impact of capitalism. For banks, it can attract scrutiny if it comes at the expense of small businesses or the wider economy. The banks considered reported a total profit after tax of N436.9 billion at the end of June 2019. This compared to N415.5 billion recorded in June 2020 indicates a 5% decline.

Though banks have often been criticized for reporting fat profits at the expense of the wider economy, it is better off having profitable banks than unprofitable ones. The more profitable banks are (consistently) over time, the more robust they are to support economic growth.

READ: Innocent Chukwuma: From selling spare parts to manufacturing an indigenous automobile brand

Banks that declared the most profits.

First Position – Zenith Bank, N103.8 billion.

Second Position – GT Bank, N94.2 billion

Third Position – Access Bank, N61 billion.

Fourth Position – FBNH – N49.4 billion

Upshots – Zenith Bank and GT Bank appear to be in a world of their own as their reported profits are significantly higher than their closest rival. In the second quarter of 2020, the gap between the profits of both were close; with N103.8 billion in profits for Zenith Bank and N94.2 billion for Zenith Bank.

In terms of the most improved bank based on profitability growth year on year, the winner goes to FBNH Bank with a 55.95% rise in profits to N49.4 billion from N31. billion. In a period where the profits of a majority of the banks considered dipped, Stanbic IBTC managed to grow its profit 24.7%.

READ: FUGAZ; Nigerian banks considered too big to fail

Return on Equity

This is another important metric used in assessing how well a bank has performed in terms of returns to shareholders. We consider this the most important in terms of performance and efficiency. You can post the largest profits but just like any regular investment you want to know what that translates to in terms of return on equity capital.

How have they performed?

First Position – Stanbic IBTC, 13.4%

Second Position – GT Bank, 13%

Third Position – Zenith Bank, 10.5%

Fourth Position – Access Bank, 9.1%.

Upshots – Compared to the corresponding period in the previous year, Stanbic IBTC (13.7) replaced GTB (16.4) at the top spot. However, Zenith Bank (10.8%) and Access Bank maintained their position, compared to the previous period.

Return on Assets

This measures how well a bank is sweating its assets to generate profits. It is one thing for a bank to have all the assets in its balance sheet but is it providing returns to all providers of capital? We like this metric at Nairametrics because it tells us how well a bank is able to run efficiently using all the resources at its disposal to generate profits for its shareholders.

Best Banks based on ROA

First Position – GT Bank, 2.1%

Second Position – Stanbic IBTC 1.4%

Third Position – Zenith bank, 1.3%

Fourth Position – Access, 0.7%

Upshots – Just like they impressed with ROE, and only second to Stanbic IBTC, GT Bank is the best bank based in terms of Return on Assets, with 2.1% and Stanbic IBTC, with 1.4%. These ratios show that these banks are well-run. However, compared with the previous corresponding period, the ratios indicated that the ROA of these banks declined.  

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Although these computations mirror the performance of the banks, the question regarding the overall best bank for the second quarter of 2020 may be judged by readers in line with the information provided in this report.

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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Financial Services

Era of backlog of unsettled claims is over – NAICOM boss

NAICOM has stated that it will monitor and sanction insurance companies who fail to settle claims as at when due.

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NAICOM

The National Insurance Commission (NAICOM) is out to seriously sanction any insurance companies with huge unsettled claims.

This disclosure was made by the Commissioner for Insurance, Mr. Sunday Thomas, at the on-going 2020 Insurance Directors’ Conference, jointly organized by NAICOM and the College of Insurance & Financial Management (CIFM), held at the Oriental Hotel in Lagos.

READ: EFCC gives reason for unspent N4 billion in 2020 budget

Mr. Thomas reiterated the need for the operators, post-pandemic, to appropriately strengthen their human and financial capital for effective participation in big-ticket risks to take advantage of the obvious gains of the domestication policy in the Nigeria Content Development Act 2010.

In his words, Mr. Thomas stated, “More businesses especially in the oil and gas and the Aviation sectors are now being reinsured abroad. Of more concern is the declining participation of life companies in the annuity business, which is the emerging business for our industry.

GTBank 728 x 90

READ: SEC issues pre-notice on cancellation of certificates of 157 inactive CMOs

“These are the areas where the industry can impose itself on the economy through the control of funds for national development. The industry must invest handsomely in technology, one of our key drivers for developing the market.

“The Institutions should be prepared to digitalize their processes, procedures, and systems, in order to make their operations seamless and real-time. The Commission is investing heavily in automating its processes and expects nothing less from the insurance institutions. An industry Information Technology Guideline has been issued for the operators and the Commission requires your support and cooperation for effective compliance.”

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(READ MORE: FG seeking FDI to develop Special Economic Zones – Trade Minister)

Why this matters

Prompt settlement of claims should be a top priority for the insurance operators in achieving an excellent and responsive customer service experience. Settlement of claims has been a serious nightmare for quite a number of customers, resulting to the abysmally low insurance culture in Nigeria.

READ: Fidelity Bank Plc must cover the chink in its curtains to keep rising 

Customers are more likely to patronize the insurance companies that are prompt in claims settlement and by extension improve the industry penetration in the market.

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Stanbic IBTC
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Financial Services

Total credit to the economy rose to N19.54trillion – CBN Governor

The CBN revealed during the MPC meeting that the total credit to the economy rose to N19.54tn as of the end of November 13.

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Total credit to the economy rose to N19.54trillion – CBN Governor, CRR debits, P-AADS, #EndSARS: CBN says funds in frozen accounts may be linked to terrorist activities, Covid-19: Court closures impacted revenue generation for courts - Emefiele, P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638., CBN expands access to mortgage financing

The CBN Governor, Godwin Emefiele, has disclosed during the Monetary Policy Committee meeting that the total credit to the economy rose to N19.54tn as of the end of November 13.

According to him, the aggregate domestic credit grew by 7.6% in October 2020 compared with 7.35% Month-on-Month in September.

READ: MTN Nigeria revenues rises to over N100 billion monthly in 2020

In his words, “Total gross credit by the banking industry stood at N19.54tn as at 13th November 2020 compared with N19.33tn at end-August 2020, an increase of N290.13bn. When compared with N15.56tn at the commencement of the LDR policy in May 2019, total gross credit increased by N3.97tn.”

According to Emefiele, the composition of the loans are N738bn to Manufacturing, General commerce N874bn, Agric and forestry N301bn, Construction N291bn, ICT (N231bn), etc.

GTBank 728 x 90

READ: CBN urges banks to ‘support’ media, aviation industries to avert growing job losses

In the month of October 2020, he stated that 86.23% of the total loans granted to over one million customers by banks were at interest rates considerably below 20% per annum.

(READ MORE: N200 billion Unclaimed Dividend: Securities dealers reject FG’s plan to manage fund)

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Bottom line

The MPC was quite optimistic and favorably disposed about the future impact of the disbursements from agri-business/Small and Medium Enterprise Investment Scheme of the sum of N92.90bn to 24,702 beneficiaries; Anchor Borrowers Program – N164.91bn disbursed to 954,279 beneficiaries; and COVID-19 Targeted Credit Facility to household and SMEs, with the sum of N149.21bn to 316,869 beneficiaries.

READ: Nigeria imported over 55% of cooking gas consumed in October 2020

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Financial Services

Despite CRR debits, Nigerian Banks record higher net interest income

Banks are recording higher net interest income, despite the CBN’s frequent CRR debits chalking off significant amounts of their cash.

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net interest income, Nigerian Banks, Fitch, Nigerian banks tremble over Cyber attack, Most Nigerian banks are very likely to fail stress tests should the economic downturn persists and deepens

Some of the top banks in Nigeria posted a total net interest income of N403 billion in the third quarter of 2020 compared to N369.5 billion in the same period in 2019.

In the first 9 months to date, the banks have reported a combined net interest income of N1.2 trillion compared to N1.1 trillion same period last year.

READ: Aviation: Nigerian ground handling firms count revenue losses due to pandemic-induced plunge

Nairametrics collated these figures from the following banks, FBNH, UBA, GT Bank, Access Bank, Zenith Bank, Fidelity Bank, Stanbic IBTC, Sterling Bank, and Union Bank. The banks recently released their third-quarter interim results.

Deposit money banks have complained bitterly over the central bank’s frequent CRR debits chalking off significant amounts of cash that they could have earned on.

GTBank 728 x 90

READ: Union Bank releases Q1 2020 result, records 14% profit increase

A Nairametrics report indicates banks suffered CRR debits of over N1.9 trillion in the second quarter of 2020, taking the total amount of customer deposits held by the CBN at about N6.5 trillion.

The figure is likely higher now as more CRR debits have occurred in the third quarter of the year. Nairametrics reported banks were debited N226 billion CRR debit in a recent update provided by reliable sources.

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However, as the above report indicates, the banks still earned more this year compared to 2020. Where banks may have suffered dips is in net interest margin, a measure of the percentage of income banks earn after netting off the cost of funds.

READ: Nigerian Banks issue N3.3 trillion in new loans in June 2020

However, this has also been largely mitigated by low deposit rates even as banks maintain most of their lending rates.

Despite the rise in net interest income for the collection of banks under our review, some banks individually faired worse in 2020 compared to 2019. FBNH, Stanbic IBTC, and Access Bank all recorded lower net interest income in the first 9 months of 2020 compared to the same period in 2019. Significant gains over the prior year were however recorded with the other banks.

READ: Access Bank Plc posts N102.3 billion profit in 9M 2020, up by 15.7% YoY

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What is driving Margins

Banks are recording higher net interest income largely because interest rates on deposits are at near-record lows.

Stanbic IBTC

This drive down in the cost of funds helps boost the income of banks because they are also yet to significantly drop their lending rates.

In the first 9 months of the year, the banks reported total loans and advances of N1.6 trillion, 14% higher than the N1.4 trillion reported at the end of 2019.

READ: FBN Holdings Plc posts Profit of N21.9 billion in Q3 2020

Banks have also reported generally improved pre-tax earnings, posting a combined N737 billion in the first 9 months of 20120 compared to N723 billion in the same period last year.

The better than expected results has triggered a boost to their share price. Banks have also seen their share price rally in recent weeks as investors finally recognize their low valuations amidst strong earnings.

The Banking sector index is up 14.72% year to date and only fell last week after investors embarked on cashing out their profits.

Explore Data on the Nairametrics Research Website

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