Despite economic headwinds in the country since the current year began, the banking sector has witnessed marked significant improvements in their operations, seemingly insulated from the hardships faced by other businesses.
The general trend with the seven banks that have so far released their first half 2023 results for the first half of the current year showed marked improvement in earnings, interest incomes as well as profitability, as they recorded a total of N878.3 billion profit, LEADERSHIP learnt.
While other businesses operating in the country have been groaning due to the volatile activities in the foreign exchange market following the floating of the naira, scarcity and other challenges, the banks are making huge profits.
Analysts have noted that the depreciation in the foreign exchange market and higher domestic interest rates have increased banks’ FX translation earnings and net interest incomes.
However, the current rise in the monetary policy rate (MPR) has mostly benefited banks, leaving other businesses with higher costs of capital. As a result, analysts reckon that the monetary policy authority would explore alternative means of addressing the steeply rising inflation rate (24.08 per cent in July) to improve real sector output and employment.
The development also resulted in a record rise in borrowing costs to its highest since the monetary policy rate was adopted in 2006.
This also contributes to the headaches of the real sector of the economy as manufacturers complain of their operations being shackled by the high cost of funding while banks rake in strong earnings.
Banks across the country had earlier in the year battled Naira notes scarcity as well as mass exodus of important personnel, especially in the ICT departments, who emigrated in search of greener pastures abroad.
Despite these hiccups, the seven banks still manage to be extremely profitable in the first half of the year, that is, from January to June 2023, making a cumulative N878.billion profit.
For instance, FBN Holdings Plc grew its pre-tax profit by 213.8 per cent to N206.3 billion in H1, 2023, which was a new record high for the oldest financial institution in Nigeria, from N65.7 billion declared in H1, 2022.
Guaranty Trust Holding Company (GTCO) recorded profit before tax of N327.4 billion, representing an increase of 217.1 per cent over N103.2 billion recorded in the corresponding period ended June 2022, while Fidelity Bank’s profit after tax stood at N61.9 billion, representing a growth of 166.0 per cent over N23.3 billion recorded in the corresponding period.
Ecobank Transnational Incorporated (ETI)’s pre-tax operating profit increased by 18 per cent to N350.7 billion ($474 million) in H1, 2023, from $401 million in H1, 2022), highlighting improved profitability, which is due to revenue growth outpacing expense growth, enhancing profitability before accounting for provisions.
FCMB Group Plc recorded positive financial performance across key indicators with a 148 per cent growth in profit before tax of N38.2 billion from January to June this year, compared to N15.4 billion in the corresponding period of 2022.
Sterling Financial Holding Company’s profit for the period rose to N10.68 billion in the first half of 2023 from N8.01 billion in the first half of 2022.
Wema Bank Plc’s profit before tax increased by 97 per cent to N12.05 billion in the first half of the year, H1 2023, from N6.1 billion in the corresponding period of 2022, H1 2022. Profit after Tax (PAT) rose in the same magnitude to N10.48 billion from N5.3 billion in H1 2022.
However, as listed banks continue to release their half-year results on the Nigerian Exchange Limited, there are indications that banks will continue their impressive performance.
The banks that have released their unaudited report for the six months period that ended June 30, 2023 so far have shown growth, despite the challenges in the economic environment.
Analysts had attributed the growth to the forex devaluation and expected revaluation gains, high-interest rate environment, continuous cost management initiatives and improved risk assets creation.
The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, said the news of acquisitions in the banking sector is a plus as the banks expand, driving higher liquidity and profitability margin with Access Holdings and Fidelity Bank making moves.
“Also, Fidelity Bank announced its first interim dividend and its ultimate entry into the rank of first-tier banks as a leader of second-tier banks with an impressive performance half-year and higher payout as seen in its just released half year result of 2023.
“Highlights of the result included the growth in gross earnings and profit after tax, which translated into 20 per cent jump in earnings per share from 69 kobo in 2021 to 80 kobo. Arising from this, we project a full-year EPS of N1.60 to N2.00 for the full-year earnings.”
CardinalStone, in its research, entitled ‘Nigerian Banks: Foraging for Value’ said that “given the heightened volatility across financial markets, driven by geopolitical developments and monetary policy responses to inflation and currency pressures, we believe full year 2023 presents a new opportunity for Nigerian banks to reimagine or consolidate go-to-market strategies.
“Even as banks have demonstrated resilience in light of post-pandemic externalities, we see renewed threats from stricter regulatory environments, political risks, and nimbler fintech competition. Against this backdrop, we assess banks’ exposures and readiness to mitigate these risks through their diversification footprints and by embracing digital technologies for scale.”
Group managing director, FBN Holdings, Mr. Nnamdi Okonkwo, had earlier said in a statement, “FBN Holdings has continued to deliver a strong financial performance despite the complex operating environment, thanks to our reinforced foundations, deep market understanding, strong risk management, and execution capabilities.
“On the back of this and in line with our focus of driving further improvement in revenue generation and profitability, the group delivered strong growth in gross earnings and profit before tax, resulting in N656.6 billion and N206.3 billion, respectively, for the first half of 2023 financial year.”
