The year 2024 was marked by improved profitability for most commercial banks in the country, marked by a steep increase in interest income on the back of a high-interest rate environment, as well as gains from repriced FX assets.
Commercial banks, in a bid to leverage the high interest rate, deployed more funds towards customer loans while leveraging high-yielding fixed income instruments and interbank placements.
The CBN raised the monetary policy rate by 800bps to 27.5% in 2024, thereby spurring higher fixed income yields and cost of capital.
According to the analysis of 10 major publicly listed commercial banks with major operations in Nigeria, customer loans rose by 38% year-over-year in 2024 to N51.4 trillion, while interest income rose 122% to N15.1 trillion.
In terms of profitability, the banks posted a combined post-tax profit of N4.8 trillion in 2024, representing a 53.5% increase compared to the N3.1 trillion recorded in the previous year.
In the same vein, Return on Average Equity (ROAE) improved from 30.9% to 31.3% year-on-year, while combined asset value surged by 50.5% to N17.9 trillion.
Why analyze the banking sector?
The banking industry is one of the major catalysts driving economic growth in any economy, contributing about 5.01% to the Nigerian economy with a nominal value of N13.7 trillion in 2024.
- The National Bureau of Statistics (NBS) reported that the banking sector grew by 30.9% in real terms in 2024, accounting for approximately 42% of the overall 3.4% real GDP growth, highlighting the sector’s significant role in driving economic expansion.
- In recent years, the banking sector has maintained a strong growth trajectory, fueled by innovation, greater financial inclusion, enhanced technological adoption, and diversified, risk-sensitive strategies.
- Although the sector continues to demonstrate strong profitability, it is essential to focus not just on earnings but also on other key performance areas such as cost efficiency, financial stability, and prudential soundness, considering that their operations involve public funds.
Nairametrics Research ranked the best-performing commercial banks in the country based on defined methodologies, which were developed to assess their level of improvement compared to the previous year.
The indicators include profit growth, asset growth, change in ROAE, deposit growth, loan growth, change in cost-to-income ratio, change in Capital Adequacy Ratio, and change in NPL ratio.
Industry view
According to the analysis, the banking sector in general saw improved profitability, resilience, although with some grey areas such as non-performing loans. Notably, profit after tax surged by 53.5% to N4.8 trillion from N3.1 trillion recorded in the previous year, largely driven by increased interest earnings.
In the same vein, the average return on average equity, which reveals how well the banks are able to generate profit using shareholders’ funds, improved to 31.3% from the previous year (30.9%).
It is worth noting that the banks were able to mobilise increased deposits during the review year, totaling N35.6 trillion to stand at N111.9 trillion as of the end of the year, while loans to customers rose 37.6% to N51.4 trillion. Meanwhile, the average cost-to-income ratio remained stable at 48.6%.
Following the announcement by the CBN for banks to recapitalize and shore up their capital base in a bid to drive the $1 trillion economy initiative of the government, the banks were able to improve average capital adequacy ratio to 22.3% from 19.5% in 2023, after some of the banks listed additional shares on the NGX.
On the flip side, average non-performing ratio increased to 4.5% from 4.1%, indicating increased loan impairment, an effect of the high capital and aggressive loan deployment move by some of the banks.
How do the banks rank?
5 – GTCO
Guaranty Trust Holding, the parent company of Guaranty Trust Bank, ranked 5th on the list of the best-performing banks in the year 2024 with 59 points. GTCo particularly ranked highest in its CAR movement, having increased from 21.9% to 39.3% over the one-year period.
Another area of notable improvement is in terms of post-tax profit, which grew by 88.6% to N1.02 trillion. The non-performing loans ratio, on the other hand, increased to 5.2% from 4.2% recorded in the previous year.
4 – Zenith Bank
Zenith Bank ranked fourth on the list of best-performing banks in 2024, majorly driven by its ability to deploy more funds towards loans to customers. Notably, customer loans increased by 52% to N9.97 trillion in the review year, representing a nominal increase of N3.4 trillion.
The capital adequacy ratio of the bank also improved to 25.6% from its initial level of 21.7%, while profit after tax surged by 52.6% year over year.
3 – FBN Holdings
FBN Holdings, the parent company of First Bank of Nigeria, recorded impressive numbers in 2024, ranking third on the list of best-performing banks.
FBN Holdings’ performance was largely driven by improved deposit mobilization, profit, and asset growth. According to the analysis, the bank ranked first in terms of deposit growth, with a 61% year-on-year increase to N17.2 trillion.
Similarly, PAT increased by 115% to N663.5 billion, while total assets gained 57% to stand at N26.5 trillion as of the end of 2024.
2 – Fidelity Bank
Fidelity Bank ranked the second-best performing bank in 2024, with notable improvements in profitability, cost efficiency, deposit mobilization, capital base increase, and performing loans.
The bank recorded the highest profit growth amongst its peers with a 179.6% increase year-on-year to N278.1 billion, as well as a substantial improvement in ROAE, moving from 26% to 41.7%.
Customer deposits also increased by 47.9% to N5.9 trillion, ranking second in that category, while the capital adequacy ratio improved to 23.5% from 16.2%. NPL ratio also dropped to 3.1% from 3.5%.
1 – Wema Bank
Wema Bank led the list as the best performing bank by their numbers in 2024, topping the list in two indicators, second across four indicators. Wema Bank recorded the highest asset growth, at 60% to N3.59 trillion in 2024.
Despite increased loans to customers, the bank was also able to bring down its non-performing loans as a percentage of total loans, as the NPL ratio dropped significantly to 3.9% from 4.3%.
In terms of profitability, post-tax profit rose by 140% year on year to N86.28 billion, while ROAE jumped from 32.4% to 43.6%. The bank also recorded a substantial improvement in its drive towards cost-effectiveness. Despite recording one of the highest cost-to-income ratios, it dropped sharply from 64.4% to 56.2%.
Bottom line
The Nigerian banking sector delivered an outstanding performance in 2024, underpinned by robust interest income, FX revaluation gains, and aggressive loan and deposit growth.
- The sector’s contribution to GDP growth and its improved capital adequacy position affirm its pivotal role in driving economic activity. As interest rates remain elevated, banks are expected to sustain strong earnings in the near term.
- However, the landscape is becoming increasingly competitive with the rise of challenger banks and fintechs, and traditional banks expanding into broader financial services.
- Going forward, innovation will be the key differentiator as banks strive to enhance operational efficiency, deepen financial inclusion, and navigate evolving regulatory and market dynamics. Sustained investment in technology, risk management, and customer-centric solutions will be critical to maintaining relevance and resilience in the fast-changing financial ecosystem.
