Nigeria’s top banks are defying the recession and sustaining their performance. Four of Nigeria’s top banks by assets, Zenith, Access, UBA and GTBank finished the year 2016 with total earnings growth of about 21.72 percent (N301billion) despite the -1.5 percent contraction in the country’s economy, the first recession in 29 years.
The four banks, which together with First Bank, are categorised as Nigeria’s Tier-1 banks, also grew cumulative profit before taxation by 29 percent (N113 billion) to N502.82billion, from N390 billion in 2015. First Bank’s financials for 2016 is still being expected. The bank had announced that its financials would be delayed because it has a “Holding” structure, which means that it has to incorporate all the financials of its subsidiary companies.
However, the performance of the Tier-1 banks confirms the consensus view of financial analysts that Tier-1 banks will always outperform the market, even in the face of challenging economic times.
“Tier-1 banks have more capital, which makes businesses to automatically gravitate towards them. They have more access to Foreign Exchange (FX) liquidity than tier-2 banks. Unlike the tier-2 banks that stick to the riskier low end market, tier-1 banks rather play hugely in the less risky upper end of the market, thus the frequency of tier-1 banks loans going bad is always low,” Abiola Rasaq, Head of Investor Relations at United Bank for Africa Plc told BusinessDay on phone.
Details of the teir-1 banks results published recently, show that Zenith Bank Plc recorded earnings of N508 billion, an increase of 17.45 percent on N433 billion in 2015. Zenith Bank also grew profit before income tax (PBT) in 2016 to N157 billion from N126 billion in 2015.
The UBA group reported a 22 percent growth in gross earnings to N384 billion in 2016, from N315 billion at the end of the 2015 financial year. The UBA group also recorded a 32 percent growth in profit before tax to N91 billion, compared to N69 billion pre-tax profit recorded in the same period of 2015.
GTBank recorded earnings of N415 billion in 2016, indicating 37 percent growth from N302 billion reported in the December 2015. The bank also reported full year 2016 profit before tax (PBT) of N165 billion, representing a growth of 37percent over N121 billion recorded in the corresponding period of December 2015.
In the review period, Access Bank Plc recorded Profit Before income Tax of N90 billion, an increase of 20 percent from N75 billion in 2015. Access Bank earnings rose to N381 billion in 2016, up from N337 billion in 2015.
“If you look at the trend over the last three years, these banks have been resilient in their earnings, regardless of the weak economy,” explained Sewa Wusu, Head, Research and Investment Advisory, SCM Capital Limited.
But Sewa also said that “FX revaluation gains helped to fuel the tier-1 banks income growth. Most of these banks are big players in the Foreign Exchange space. Because of their huge balance sheet size, they attract more customers.”
Financial analysts covering the tier-1 banks listed on the Nigerian Stock Exchange (NSE) however believe that the market is yet to respond appropriately to these banks positive outing, which may not be unconnected to the current weak market sentiments at the bourse.
UBA share price has made capital gains of 15.1 percent since the beginning of this year, the only tier-1 bank that has seen significant appreciation in its share price. The share price closed at N5.18 yesterday. Access Bank share price is also up 6.6 percent year to date, to close at N6.25 yesterday. But GTBank share price is marginally down -1.6 percent, closing at N24.17 yesterday, while the share price of Zenith Bank is down -3.79 percent, since the beginning of the year, to close at N14.30.
Iheanyi Nwachukwu
