Early earnings report of Nigerian lenders that have released results so far shows they are cutting costs to boost their bottomline. This strategy is with a view to giving shareholders a high return on their investment in the form of higher dividend.
The 2014 audited financial results of four banks (GTBank, Access Bank, Zenith Bank and Unity Bank) showed remarkable improvement in their cost-to-income ratio.
The cost-to-income ratio shows the efficiency of a bank in minimising costs while increasing profits. The lower the cost-to-income ratio, the more efficient the bank.
Though not a tier 1 lender, Unity Bank is the best performer in terms of efficiently running operations to bolster profit. Its cost-to-income ratio reduced to 69.57 percent in 2014 from 218.87 percent the previous year.
The cut costs also helped the bank revert to profitability as it posted a profit after tax (PAT) of N10.69 billion.
Access Bank’s cost-to-income ratio reduced to 62.2 percent in FY 2014 from 73.1 percent the previous year on the back of revenue uplift and cost efficiency. Operating expenses rose slightly by 3 percent.
The bank’s net income grew by 20 percent in the review period.
Zenith Bank’s cost-to-income ratio increased marginally to 57.74 percent in FY 2014 from 57.10 percent while operating expenses moved up by 11 percent due to staff promotion. It recorded a 4.43 percent increase in net income in the review period.
GTBank’s cost-to-income ratio increased slowly to 43.4 percent in 2014 compared with 42.9 percent in 2013. The most efficient lender’s operating expenses rose by 15 percent while recording a 10 percent growth in net income.
Despite the slow earnings season, results released so far showed the lenders are overcoming the macro-economic regulatory headwinds bedevilling firms in Africa largest economy.
Patrick Atuanya & Bala Augie
