Nigeria’s seven topmost banks signposted resilient performance in the first half of this year with top-line earnings rising to N1.77 trillion despite the COVID-19 lockdowns that disrupted activities for the most part of the period.
All the seven largest banks recorded increased top-line, but the underlying profitability of the sector declined by almost two basis points.
The seven first tier banks are Guaranty Trust Bank (GTBank), Zenith Bank Plc, Stanbic IBTC Holdings, Access Bank, United Bank for Africa (UBA), FBN Holdings and Union Bank of Nigeria (UBN).
They account for more than three quarters of the banking industry and are referred to as systemically important banks, in reference to their size and operations.
Total gross earnings within the top seven banking group rose by 7.8 per cent to N1.77 trillion in first half 2020 compared with N1.65 trillion recorded in corresponding period of 2019.
Total pre-tax profit dropped marginally by 0.74 per cent from N463.79 billion in first half 2019 to N460.38 billion in first half- 2020, driven largely by steep decline in the profit of a bank. Profit after tax rose by 10.13 per cent from N388.87 billion to N428.29 billion.
However, the underlying profit-making capacity of the sector declined during the period with an average pre-tax profit margin for the top seven banking group dropping from 28.46 per cent in first half 2019 to 26.94 per cent in first half 2020. With the exception of Stanbic IBTC Holdings and FBN Holdings, the two bank-led holding companies within the group, all the other banks suffered decline in underlying profitability.
The banks are required by regulations to maintain the Gregorian calendar year as their financial year, with half-year ending June 30, every year.
A market intelligence report by The Nation yesterday showed that GTBank, Nigeria’s most capitalised financial institution, remains the most profitable with a pre-tax profit margin of 48.73 per cent in first half 2020, more than three basis points below 52.19 per cent recorded in first half 2019. Stanbic IBTC Holdings recorded the biggest improvement with pre-tax profit margin rising from 38.04 per cent to 41.41 per cent. FBN Holdings’pre-tax profit margin also improved from 12.93 per cent to 13.97 per cent.
In actual figures, Access Bank displaced Zenith Bank to emerge with the highest gross earnings but Zenith Bank also displaced GTBank to assume leadership in actual pre- and post-tax profits. Access Bank’s gross earnings rose from N324.38 billion to N396.76 billion.
Zenith Bank’s profit before tax rose from N111.7 billion to N114.12 billion while profit after tax increased from N88.88 billion to N103.83 billion.
The two leading banks – GTBank and Zenith Bank – recorded above-average performance across major indices.
The five biggest banks that traditionally pay dividends twice yearly – GTBank, Zenith Bank Plc, Stanbic IBTC Holdings, Access Bank and UBA – have declared interim dividend for the six-month period.
GTBank and Zenith Bank will distribute a dividend per share of 30 kobo. Stanbic IBTC Holdings is paying the highest interim dividend of 40 kobo per share.
Access Bank retains its 25 kobo per share while UBA will distribute interim dividend of 17 kobo per share.
Analysts at Afrinvest Securities said better-than expected earnings by many banks sustained the bullish run that saw the Nigerian equities market closing with average gain of 1.2 per cent at the weekend.
Cordros Securities noted that the stock market recorded a higher level of activity from both local and foreign investors, “as positive earnings releases from the tier I banks and bargain buying across some bellwethers drove the market to its largest gain in almost a month”.
The All Share Index (ASI)- the value-based common index that tracks all share prices at the Nigerian Stock Exchange (NSE) closed weekend at 25,605.64 points, its highest level since March 9.