For many businesses, the first quarter of 2021 was expected to be the start of a business rebound after the pandemic induced economic crisis in 2020 severely hurt global business performance. However, for some of Nigeria’s biggest banks, the negative impact of the pandemic is still evident in their financial performance in Q1 2021.
About seven banks which include the likes of GTBank, FBNH, Zenith, Stanbic, Union, Fidelity and FCMB all reported their lowest interest income performance in at least the last 5 quarters. In Q1 2021, these banks reported a combined interest income performance of N326.1bn compared to their preceding 4 quarters where they earned N357.2bn in Q4 2020, N366.6bn in Q3 2020, N629.7bn in Q2 2020 and N397.4bn in Q1 2020.
Analysts say the cause of the dip in interest income performance could be associated with low loan disbursement in mid-2020 which usually translates to lower interest income in subsequent quarters. Industry analysts say financial services companies slowed down on loan disbursements in the second quarter of 2020 due to the prolonged city lockdown and uncertain business environment.
Overall, the slowdown in these 7 banks caused the industry’s interest income performance to decline significantly in Q1 2021. The 13 publicly listed banks reported a combined Q1 interest income of around N794.3bn which was lower than the N1.2tn reported in Q4 2020, N827.3bn in Q3 2020, N1.06bn in Q2 2020 and N836.3bn in Q1 2020.
Along with weaker interest income earnings in the industry in Q1 2021, non-interest income also suffered a beating in the first quarter of 2021. The banks Q1 results revealed that all 13 publicly listed banks saw their combined interest income fall to N430.5bn in Q1 2021, compared to N705.4bn in Q4 2020, N453.6bn in Q3 2020, N562.6bn in Q2 2020 and N437.1bn in Q1 2020.
This means that interest income and non-interest income for the banking industry declined to its lowest levels in at least the last 5 quarters in Q1 2021. However, a significant drop in interest expense and loan loss provision for banks helped ensure that industry profitability did not drop to its lowest level in the last 5 years.
Industry interest expense dropped to N242.7bn in Q1 2021, its lowest level in at least the last 5 quarters while loan loss provision dropped to N68.7bn in Q1 2021, its lowest level since Q1 2021. The improved efficiency levels helped the industry to report a Profit after tax of around N269.2bn in Q1 2021, representing its 3rd best quarterly performance in the last 5 quarters.