Nigerian Banks Show Resilience as Profit Surges to N3.03trn

Nigerian banks reported a big jump in Full Year 2023 earnings as the largest lenders gained from foreign exchange revaluation gains as well as elevated yields in the debt market.

The combined net income or profit after tax (PAT) of the most liquid and capitalised lenders surged by 205.81 percent to N3.03 trillion in December 2023, from N991.24 billion as at December 2022, according to data gathered by MoneyCentral.

A consistent earnings growth paves the way for lenders to hike dividend payment, which make their shares more attractive to investors who crave for dividend paying stocks.

In line with historical trends, Tier-1 banks were the major contributors to the industry’s earnings growth, accounting for 85.5 percent of the total gross earnings during the period.

It is a known fact that monetary policies have been a boon for lenders. For instance, the hike in interest rates by the central banks that seeks to tame inflation added strength to net interest income while the abrupt devaluation of the currency led to a windfall in foreign exchange revaluations gains that intensified the bottom line (profit).

There are indications that banks will plough back most of the profit from  revaluation gains in 2023 into the business in the form of retained earnings to  support Tier 1 capital, thereby minimising the FX pressures on capital adequacy.

The Apex Bank has issued a 24-month ultimatum to banks to raise their capital base to a new minimum in a move to strengthen the financial system.

The new requirement puts the minimum capital base for banks with international authorisation at N500 billion. It also raised the minimum capital base for commercial banks with national authorisation to N200 billion, while those with regional authorisation was jerked up to N50 billion.

Guaranty Trust Holdings’ profit after tax spiked by 218.99 percent to N539.65 billion as at December 2023.

United Bank for Africa, First Bank Holdings, Access Corp, and Zenith Bank saw their profit surged by 256.89 percent, 127.57 percent, 305.05 percent, and 202.31 percent respectively.

Of course, Banks have shown resilience by overcoming the Ghana crisis where some of them with branches in the West Africa country incurred huge impairment charges on the bond, varying from 10 percent to 59 percent of the outstanding value of their respective investments.

Analysts are of the view that there is going to be a slowdown in profit growth this year as there is not going to be an aggressive currency devaluation as foreign exchange gains fade.

“We expect DMBs’ bottom-line to come under pressure in 2024 as earnings will normalize across players,” said analysts at Cordros Securities Limited.

“Nonetheless, we believe that major income lines, particularly the core income line, will remain resilient. Our reasoning for stronger core income growth is that we expect the interest rate environment to remain elevated, which will translate to higher net interest margins (NIMs),” said the analysts.

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