Revealed: How 5 banks gained N103.78bn in 6 months

A total of five out of 16 quoted commercial banks on the floor of the Nigerian Stock Exchange (NSE) have recorded total profit of N103.78 billion in the first six months of 2018.

This amount represents N23.67 billion or 29.6 per cent increase reported by the five banks in six months of 2018 when compared to N80.11 billion profit recorded by the same banks in the same period of 2017.

The five banks are First City Monument Bank Group, Ecobank Transnational Incorporated Plc, FBN Holdings Plc, Wema Bank Plc and Union Bank of Nigeria Plc.

Details of the results showed that the five considered banks reported increase in profit with First City Monument Bank Group Plc reporting the most significant increase by percentage, with FBN Holdings reporting the lowest by percentage.

Analysts have said the increase in the performance of the banks was as a result of more prudent management of their activities as regarding reduction in impairment losses and increasing gross earnings.

Checks by The Daily Times showed that First City Monument Bank Group’s profit soared by 89.7 per cent to N5.7 billion in six months of 2018 from N3 billion reported in six months of 2017.

The management of FCMB Group in a statement said, “The improved performance reflects the improving performance of the bank, as well as, the effects of diversification through our investments in asset and wealth management.”

The group statement added that “Barring any unforeseen circumstances, we see improved operating performance in the second half of 2018, based on the stabilising macro-economic and capital markets environment, declining cost of funds for the bank, and the growing contributions of our asset and wealth management division.”

This was followed closely by Ecobank Transnational Incorporated Plc with 36.6 per cent increase in profit to N51.6 billion from N37.7 billion reported in six months of 2017.

Wema Bank Plc, with a profit N1.57 billion, came next, showing a 28.8 per cent rise compared to N1.22 billion profit in June last year, while, Union Bank of Nigeria Plc followed, rising by 24.5per cent from N9.2 billion to N11.46 billion in the period under consideration.

The group, FBN Holdings Plc reported N33.4 billion in six months of 2018. 15.7 per cent increase over N28.9 billion reported in six months of 2017.

In a statement, the Acting Chief Executive Officer, Wema Bank, Mr. Ademola Adebise, said, “With these half-year results, we believe we are on track to deliver on our commitments to shareholders at the beginning of the year.”

Also, the Chief Executive Officer, Union Bank of Nigeria, Mr. Emeka Emuwa, said: “In the first half of the year, we have continued to see positive results from our efficiency and productivity drive.

Across all our business lines, we witnessed strong underlying performance, translating into improved earnings. We continue to focus on the recovery of non-performing loans.

“The Group continues to demonstrate its ability to deliver strong results notwithstanding a competitive and challenging operating environment.

“In the second half of the year, we will continue to focus on productivity, leveraging our enhanced platform to deliver best-in-class services to our customers and taking advantage of targeted opportunities across business lines and geographies.”

The performance by these banks has outshined analysts’ prediction so far.

According to the Head of Research, Coronation Research, Guy Czartoryski, said: “For two years, Nigerian banks have had an easy time, earning good income on risk-free government-backed, Naira-denominated securities. That era is drawing to a close as T-bill rates fall.

“Asset yields are trending south, and it is almost impossible to re-price liabilities to match. So, banks must either find other sources of income or face an average 15% drop in their Profits Before Tax expectation for 2018.

“For the banks to replace the portion of income threatened by declining yields on securities, they must grow risk-weighted assets. This means a 6-12% rise in customer loans in 2018.”

The report categorises banks into three tiers – Group A, Group B and Group C. Banks in Group A being the most well capitalised, have the biggest opportunity to increase consumer lending.

According to the report, Group A includes Zenith Bank, GTBank and Stanbic IBTC, which have the ability to significantly expand their loan books by 69 per cent, 82 per cent and 182 per cent respectively.

Group B including UBA, Access Bank and Fidelity Bank, have moderate capital levels and some ability to expand loans books but may also pursue tier II capital raise in the form of long-term subordinated debt.

Group C including FBNH, Diamond Bank and Sterling Bank, in the short to medium term have limited ability to expand their loans books and will most likely focus on dealing with capital issues and might attempt to raise long term capital from the capital market.