Twelve listed Nigerian banks have posted a total profit after tax of N634.88 billion for the third quarter (Q3), 2018.
The profit after tax of the 12 banks went up by 15.28 per cent when compared to N552.475 billion recorded in third quarter, 2017.
Majority of Nigerian banks have demonstrated their resilience in the last two years amid macro-economic challenges, which weighed on credit expansion, asset quality and capital adequacy to record positive performances.
Activities in the Nigeria equities market since the January bull run have been largely bumpy, as the dual impact of domestic worries, and the reverberating effect of global concerns continue to weigh on the market. The equities market recorded year-to-date losses of 16.68 per cent as at November 15, 2018.
Zenith Bank led in absolute terms, recording a profit after tax of N144.179 billion, followed by GTBank which posted N142.22 billion net profit. Ecobank occupied third position recording N76 billion profit after tax. Access Bank declared a profit after tax of N62.9 billion, while United Bank for Africa (UBA) recorded N61.7 billion net profit.
In percentage term, Wema Bank led the profitability chart as it surged by 72.9 percent to N2.644 billion from N1.529 billion in Q3, 2017. It was trailed by Stanbic IBTC which went up by 58.6 percent to N59.76 billion from N37.67 billion in Q3, 2017. Sterling Bank profit after tax went up by 38.98 percent to N8.2 billion from N5.9 billion, Ecobank net profit rose by 31 percent to N76 billion from N58 billion and Fidelity Bank profit after tax up by 23.6 percent to N17.86 billion, compared to N14.45 billion.
The chief operating officer of InvestData Consulting Limited, Ambrose Omordion said that a look at the Q3 numbers as a whole, by matching the actual numbers with expectations, and benchmarking them against those of the corresponding period of last year, we would see an obvious underperformance by way of weakened sales revenue as mentioned earlier.
He noted that profit levels were slightly above average in the period under review, due mainly to cost cutting measures as well as extraordinary incomes, which are mostly one-off.
He noted further that amongst the banks, for example, the rising oil price before the recent pullback impacted positively on the loan book, given that a sizeable chunk of their exposure was to oil companies, as well as the power sector, saying that this enabled players in the oil and gas sector repay their loans, including some that had been written off and duly provisioned for, which is why some of the banks reported write-back of such previously provisioned “bad and doubtful” loans, resulting in bigger profit margins.
Analysts at United Capital Plc said that four of the Tier-one banks Access Bank, Guaranty Trust Bank UBA and Zenith Bank, as expected, the relatively lower yield environment had a profound impact on the performance of these banks.
They stated that though the irrelative sizes and liquidity ratios continued to determine earnings sensitivity to interest rate dynamics.
“Our review of the nine months, 2018 financial scorecards of these top-four banks indicated that while deposit growth sustained momentum as observed in Q2, 2018, the drive to expand their loan books remained muted,’’ the analysts stated.
According to United Capital, outlook of the sector in 2018 along four key themes, banks will have to weather a lower-rate environment in 2018. Though the big tier-one players remain defensive, given their scale advantage, we anticipate more earnings upside from tier-two players whose biggest benefit would come from a sharp decline in cost of funds.
“The expectation of improved system liquidity in 2018, on account of reduced government borrowing should be positive for credit growth, potentially helping to compensate for the loss in income from securities portfolios. Also, the proactive nature of the provisioning, as specified in IFRS 9, may increase Cost of Risks and reduce Capital Adequacy Ratios across the sector. Notwithstanding, improving macro climate should continue to bode well for asset quality.
“Improved market valuation, the need to shore up capital buffers, and lower interests will likely prompt more capital raising for banks in 2018. Increased domestic dollar liquidity should however moderate Eurobond issuances.”
Analysts at Cordros Capital, said performance in the banking sector was mixed, with Zenith Bank, Guaranty Trust Bank and Access Bank posting positive year-on-year (y/y) growth in Q3, 2018, while United Bank for Africa and FBN Holdings Plc recorded declines.
The head of Research & Investment, FSL Securities Limited, Mr. Victor Chiazor, said: “we observed that the nine months 2018 results for companies came in mixed with a few negative surprises especially in the consumer goods space were most players reported significant decline in bottom line performance. However, we are impressed with major players in the banking sector given their ability to maintain decent profit levels despite the headwinds observed during the period. We expect the banking sector to lead the way into the full year earning but project that corporate action in terms of dividend declared by companies would be a major driver of share prices in the full year.”