SBM Report: Tier-2 banks show resilience ahead of CBN’s 2026 recapitalisation deadlin

SBM Intelligence has released a new report analysing the financial health of Nigeria’s Tier-2 banks, showing resilience in the face of economic headwinds and a major regulatory shake-up.

The report, “Capital, Competition, and Consolidation”, benchmarks the performance of mid-tier banks, such as FCMB, Fidelity, Stanbic IBTC, Sterling, and Wema, against the Central Bank of Nigeria’s (CBN) 2026 recapitalisation deadline.

While Tier-1 banks, including Zenith and Access, have posted record-breaking results, SBM argues that Tier-2 lenders have outperformed expectations in several cases.

Share price trends between 2020 and 2025 underline this strength, with Fidelity Bank singled out as a standout performer after its stock surged by more than 1,100 percent in five years.

According to the report, Fidelity’s rally has been driven by strong earnings, rapid digital expansion and capital-raising efforts.

It adds that the growth gap among the banks highlights the importance of strategic positioning, digital transformation and capital adequacy in creating shareholder value.

The report also identifies FCMB as a top performer. Its Q1 2025 results showed gross earnings of N252.7 billion, up 41 percent year-on-year, with a 71 percent jump in interest income driving most of the growth.

Pre-tax profit rose 11.7 percent to N35 billion, reflecting effective cost controls.

Despite a foreign exchange loss of N2.3 billion, FCMB’s non-interest income contributed 27 percent of total revenue, beating its peers. Analysts say this diversification remains a crucial buffer in an economy where interest rate volatility poses significant risks.

SBM further highlights FCMB’s cautious approach to its balance sheet. Its loan-to-deposit ratio stood at 59 percent, lower than many competitors, while its non-performing loan ratio was 4 percent—below the CBN’s 5 percent threshold.

“Recent performance trends suggest that Tier-2 banks are not standing still. Industry watchers expect the coming months to see a surge in mergers and alliances among Tier-2 players as they seek to achieve scale,’ the report reads.

“Larger combined entities would be better positioned to compete with Tier-1 institutions, expand access to credit, and invest in innovation.

“Still, consolidation brings risks. Integration hurdles, job cuts, and the marginalisation of smaller players could destabilise the sector if not carefully managed. The recapitalisation drive will make banks stronger, but it won’t be painless.”

The report concludes that these indicators provide a strong base for expansion and position the bank to benefit from sector consolidation.