The top 5 largest banks in Africa’s largest economy are gradually enjoying juicy yields as income from treasury bills, government bonds and others grew at the fastest pace in a decade.
It is noteworthy that lenders pack their money in fixed income securities when yields are high to earn sizable income, which means central bank’s monetary policies are pivotal to sector players’ earnings growth.
For instance, Zenith Bank, Access Bank, United Bank for Africa, Guaranty Trust Holdings Company, and FirstBank Holdings saw their combined income from investment securities jump 33.63 percent to N233.92 billion as at March 2021, according to data gathered by MoneyCentral.
In the 2020 financial year, income from both short and long term government securities jumped 7.03 percent to N175.04 billion.
Tier 1 lenders witnessed a drop of 18.20 percent in income from short and long term government securities to N163.55 billion, as the decision of the central bank to ban individuals and local corporates from investing in its OMO bills sent T-bills yields crashing.
In the last six years, these five lenders made N1.01 trillion in income from investment securities, and analysts are optimistic they will continue to enjoy juicy yields on the expectation of a benign interest rate environment.
The 12-month treasury yield which hovered between 1 percent and 3 percent between the last quarter of 202o and first quarter of 2021 (pre and post pandemic period) now stands at 4.90 percent.
Also, Nigeria’s 10-year yield stood at 12.0 percent on Monday, May 16, according to over-the-counter interbank yield quotes for this government bond maturity.
And that compares with 8 percent in the first quarter of 2021 and 4.18 percent in the last quarter of 2020, according to data from Statista.
Zenith Bank realised N71.07 billion in short and long term government securities, which is 52.30 percent higher than 2021’s N46.66 billion. It raked in N304.66 billion in the last six years.
Access Bank, the largest lender by total assets, saw income from investment securities spike by N67.97 billion in the first quarter of 2022 and it made N192.41 billion in the last six years.
United Bank for Africa (UBA) saw income from treasury bills and bonds increase by 30.75 percent to N49.30 billion as at March 2022.
Guaranty Trust Holdings Company or GTCO’s income from investment securities were up 22.74 percent to N11.82 billion in March 2022 from N9.63 billion the previous year.
The strong growth in investment securities bolstered the bottom line (profit) of banks, as they weathered a punitive regulatory environment, but downside risk to earnings remains political risk associated with the 2023 elections, effective tax rate, and sluggish economic growth.
Data gathered by MoneyCentral shows the mega lenders saw combined net income move to N242 billion in the three months period to March 2022.
Drilling down into the numbers, historic analysis shows they collectively grew net income by 5.53 percent to N223.63 billion in March 2021. Profit was up 2.21 percent to N211.90 billion in 2020 and it rose by 17.53 percent to N207.37 billion in 2019, 13.81 percent to N177.03 billion in 2018 Q1 period.