Tier-One Banks Book N1.40 trn in FX Revaluation Gains in H1

The largest Nigerian banks booked unprecedented amounts of money from foreign exchange (FX) revaluation gains in the first half of the year, as the Central Bank of Nigeria (CBN) urged lenders not to declare jumbo dividends.

Data gathered by MoneyCentral showed that the 5 tier-one banks: FBN Holdings Plc (FBNH), Guaranty Trust Holding (GTCO) Plc, United Bank for Africa (UBA), Zenith Bank Plc, and Access Bank, (Q1′ results) realised a combined N1.40 trillion in foreign currency revaluation gains a at June (H1) 2023.

That compares with N294.11 billion in H1, 2022; N122.56 billion in H1, 2021; N35.07 billion in H1, 2020; N71.96 billion in H1, 2019; N65.88 billion in H1, 2018; N80.98 billion in H1, 2017, and N84.55 billion in H1, 2016, according to data gathered by MoneyCentral.

Breakdown shows FBNH realised N235.97billion in FX gains; GTCO, N357.47billion; UBA, N348.43billion; Zenith Bank Plc, N355.48billion, and Access Bank (Q1’2023 numbers), N112.32billion.

FX revaluation gains refer to the increase in the value of a bank’s assets and liabilities denominated in foreign currency when there is a change in the exchange rate between the foreign currency and the local currency.

It is worth noting that the Central Bank of Nigeria (CBN) and stakeholders who are circumspect of the macroeconomic environment and capital risk have barred lenders from spending most of the windfall or FX gains on paying dividends or financing operations.

They have advocated financial institutions use part of the money to bolster capital levels against shocks.

Analysts expect the increases in bank profits as a result of exceptional gains to allure investors to bank stocks that have been rallying since June.

The NGX ASI Banking index has gained 56.11 percent so far this year, outperforming the broad market indexes.

Access Bank has a year to date (YTD) gain of 80.16 percent; FirstBank Holdings, 55.15 percent; GTCO, 52.52 percent; UBA, 81.60 percent; and Zenith Bank, 40.0 percent.