Nigeria’s largest banks who are pumping out huge profit have been helping to pick up the slack from industrial goods, telcos, health, and agric firms mired in an earnings slump.
Soaring interest rates due to the hawkish stance of the central bank and foreign exchange revaluation loss brought by a sudden devaluation of the currency have debilitated the bottom lines of companies.
But it appears banks are the beneficiary of the current monetary policies, especially since mid-year when the precipitous slump in Naira impacted positively on the dollar denominated assets.
Zenith Bank, Access Holding, United Bank for Africa (UBA), FirstBank Holdings, Guaranty Trust Holdings, Fidelity Bank, Stanbic IBTC Holdings, and Ecobank, collectively grew net income or profit after tax (PAT) by 149.55 percent as at September 2023, according to data gathered by MoneyCentral.
The seven big banks posted a combined profit of N1.80 trillion that is 78.60 percent of the entire N2.29 trillion bottom line of the NGXASI 30 firms.
That compares with combined 18.34 percent net income growth of Dangote Cement, Lafarge Africa, and BUA Cement, who are the largest producers of the building materials.
The consumer goods firms posted a cumulative net loss of N148.56 billion as at September 2023 from a profit of N88.41 billion as five of the eight firms on the index capitulated to macroeconomic headwinds.
Seplat Energies and TotalEnegies, the two biggest oil firms on the index collectively grew net income by 29.40 percent, but Seplat’s profit was bolstered by tax credit.
MTN Nigeria and Airtel Africa, the telco giants, saw combined net income dip by 72.34 percent as at September 2023.
“It is has been a good year for banks as they have made money from revaluation gains,” said Tajudeen Ibrahim, head of Research and Strategy at Chapel Hill Denham Limited.
“However, it is difficult for them to maintain the growth momentum into the first quarter of next year as the earnings growth is driven by FX gains that is not sustainable; therefore, we are going to see a slow down in earnings as lenders will depend on their core business which is lending,” said Ibrahim.
The NGX 30 index has year to date (y-t-d) gains of 41.43 percent, a rally that has been underpinned by local investors as their foreign counterparts are on the sidelines because they are not yet convinced that the current administration will cling on to the new reforms.
The NGX Banking index has gained 75.02 percent since the start of the year while the consumer goods, oil and gas and industrial goods have a year to date return of 95.23 percent, 106.40 percent, and 17.15 percent respectively.
Of course, the stock performance is not a representation of the economy as rising inflation exacerbated by the removal of subsidies on petrol and unification of a market friendly exchange rate system have been waging war on consumers.
It is important to note that Russia and Ukraine, which sent the price of grains skyrocketing, have compounded the woes of companies.
“Since Nigeria is a member of the global economy, it is not immune from macroeconomic headwinds as a tightening campaign by the United States Feds have ballooned mortgage rates,” said Minister of Finance and Coordinating Minister for the Economy, Wale Edun.
The country’s headline inflation rate for October stands at 27.33 percent, according to data from the National Bureau of Statistics (NBS).
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