Nigerian banks had a blockbuster year in 2024, leveraging a high-interest rate environment to significantly boost their earnings from customer loans.
According to the analysis of ten publicly listed banks on the Nigerian Exchange, a staggering N8.41 trillion was generated from interest on customer loans.
This represents a 106% increase compared to the N4.08 trillion recorded in the previous year, according to analysis by Nairametrics Research.
The surge follows the Central Bank of Nigeria’s (CBN) decision to adopt one of its most aggressive monetary policy stances in recent history.
CBN raised the benchmark interest rate by over 800 basis points in 2024 to 27.5%, in a bid to tame inflation and stabilize the economy.
This tightening cycle created a fertile ground for banks to adjust their lending rates upwards, effectively doubling their income from loans and advances to customers.
Banks ramp up customer loans
By year-end 2024, the combined loan portfolio of the ten listed banks stood at N51.36 trillion, marking a 37.6% increase from the figure recorded in 2023. This growth reflects a combination of increased credit activity and the repricing of existing loans to align with the prevailing interest rate dynamics.
- Beyond customer loans, banks also saw a significant uptick in interest income from other financial instruments.
- Earnings from government securities, corporate bonds, and interbank placements reached N6.66 trillion, compared to N2.7 trillion in 2023.
- Altogether, interest income contributed a substantial 72.4% to the gross earnings of these banks, reflecting the central role of interest-generating assets in their business models.
- The remaining revenue came from fees and commissions, trading income, and other ancillary services.
While Access Corporation recorded the highest interest income on customer loans, Wema Bank led the list based on interest on average loan, at 23%.
Below is a detailed breakdown of the top earners from customer loans in 2024
#5: Fidelity Bank – N626.3 billion
- Fidelity Bank posted N626.3 billion in interest income from customer loans in 2024, representing a 72% increase from N363.4 billion earned in 2023.
- The bank expanded its loan book by 42% to N4.39 trillion, with an average loan portfolio of N3.74 trillion during the year. Interest on customer loans yielded 17%, highlighting the bank’s strong pricing power and lending growth.
#4: UBA – N779.7 billion
- United Bank for Africa (UBA) earned N779.7 billion as interest on customer loans in 2024, nearly doubling the N391.9 billion recorded in 2023, up by 99%.
- UBA’s loan book grew 33% year-on-year to N6.95 trillion. The bank had an average loan portfolio of N6.09 trillion for the year, and interest on loans yielded an average of 13%.
#3: First HoldCo – N1.36 trillion
- First HoldCo, the parent company of First Bank of Nigeria, recorded N1.36 trillion in interest income on loans in 2024, an impressive 124% increase from the N609.8 billion made in 2023.
- The Group’s customer loan portfolio expanded by 38% to N8.77 trillion, positioning it among the top-tier lenders. Average customer loans for the year stood at N7.56 trillion, while interest on loans averaged 18%.
#2: Zenith Bank – N1.52 trillion
- Zenith Bank earned N1.52 trillion in interest on customer loans in 2024, a 126% increase from the N671.9 billion recorded in 2023.
- With customer loans rising by 52% to N9.97 trillion in 2024, Zenith Bank maintained one of the largest loan books in the Nigerian banking industry, second to Access Bank.
- The bank’s average customer loan portfolio stood at N8.26 trillion during the year, and interest on loans averaged 18%.
#1: Access Corporation – N1.63 trillion
- Access Corporation, the parent company of Access Bank, made a sum of N1.63 trillion as interest on customer loans in 2024, surpassing the N747.2 billion made in 2023 by 118%.
- Access Bank, which boasts the highest customer loan book of N11.49 trillion, had grown its loan book by 43% during the year.
- Average customer loan stood at N9.76 trillion for the year, while interest on the customer loans averaged 17%.
What this means
- The 2024 financial performance of Nigerian banks highlights a year of strong interest earnings from customer loans, buoyed by loan repricing, FX revaluation gains, and an overall expansion in credit portfolios.
- However, this surge in loan interest income came with its own set of challenges. A higher interest rate environment significantly drove up banks’ cost of funds, with notable increases reported by Zenith Bank (+180pbs), Stanbic IBTC (+60bps), and GTCO (+28bps).
- Furthermore, the burden of elevated borrowing costs was visibly passed on to borrowers, contributing to a rise in non-performing loans (NPLs).
- The average NPL ratio among the top ten banks climbed from 4.1% in 2023 to 4.5% in 2024, highlighting the pressure on businesses and households in meeting loan obligations.
- Looking ahead, the trend may persist into 2025. With the Monetary Policy Rate (MPR) still elevated at 27.5% as of April and inflation printing above 24% in March, the Central Bank of Nigeria may maintain a tight monetary stance.
- This sets the stage for another year of robust loan interest income for banks, albeit with continued pressure on loan quality and funding costs.
- In essence, while 2024 was a rewarding year for the banking sector in terms of loan profitability, it also marked a cautionary tale of balancing income growth with asset quality sustainability.
