Despite Harsh Economy, 12 Listed Banks Post N3.81trn Profit In H1

Amid challenging economic conditions, 12 listed banks in Nigeria reported high profit margins of N3.81 trillion profit before tax for the first half of 2024, marking a 108.2 per cent increase from N1.83 trillion in the same period last year.

12 listed financial institutions on the Nigerian Exchange Limited recorded a combined pre-tax profit of N3.808 trillion as at the half year ended June 30, 2024.

The institutions, which are: Guaranty Trust Holding Company (GTCO), Zenith Bank, Fidelity Bank, United Bank for Africa (UBA), Access Holdings, Stanbic IBTC Holdings, FCMB Group, Wema Bank, FBN Holdings (FBNH), Jaiz Bank, Ecobank Transnational Incorporated (ETI) and Sterling Financial Holdings Company, increased profit before tax by N1.979 trillion or 108.201 per cent when compared to N1.829 trillion in H1, 2023.

Analysts noted that the banking sector’s performance was driven by significant increases in net interest income and fair value gains on financial instruments, influenced by rising interest rates and naira fluctuations, contributing to record-breaking profits for several banks.

Reviewing the banks’ profitability during the period under review showed that GTCO posted the highest profit in banking history for the period, growing pre-tax Profit by 206.6 per cent to N 1.004 trillion as against N327.40 billion in H1, 2023.

Zenith Bank declared profit before tax of N727.030 billion, an increase of 107.51 per cent, while UBA achieved pre-tax profit of N401.577 billion in H1, 2024.

Also, Fidelity Bank (N200.872 billion pre-tax profit), Access Holdings (N348.922 billion), Access Holdings (N202.7 billion), Stanbic IBTC Holdings (N147 billion), FCMB (N64.209 billion), Wema Bank (N30.565 billion), FBNH (N411.990 billion), Jaiz Bank (N11.562 billion), ETI (N443.513 billion) and Sterling Financial Holdings Company (N17.346), showcasing the sector’s profitability and growth despite economic challenges.

Vice president, Highcap Securities Limited, Mr. David Adnori attributed the banks’ financial performance to the devaluation of the naira, saying most banks have international affiliations, with a significant portion of their assets denominated in dollars.

According to him, “as a result, the devaluation has led to a substantial increase in their profits. In the history of banking, hardly any bank has ever declared PBT of up to N400 billion in a half-year period. However, due to the devaluation and the transition from a pegged exchange rate to a freely floating one, banks have experienced a significant spike in their declared profits in the first half of 2024.”

Adonri added that a substantial portion of this increased profitability of these banks is attributed to non-interest income. The devaluation has affected fees, commissions, off-balance sheet transactions, and other non-interest income sources, which now contribute significantly to the banks’ higher profits.

Investment Banker & Stockbroker, Mr. Tajudeen Olayinka said, a significant portion of the banks’ recent profit gains came from revaluation gains on their net long US dollar income positions.

He stated that most banks have structured their balance sheets to maintain net long US dollar positions, which means that they are able to record gains whenever the currency is adjusted.

“Most tier-one banks currently hold a net long position in USD. This means that their foreign currency assets exceed their currency liabilities. Consequently, whenever there is currency revaluation, it will positively impact their profits,” Olayinka said.

Speaking on the company’s performance, the Group chief executive officer of GTCO, Segun Agbaje, said, “despite the uncertainties in the operating environment, our performance in the first half of the year, where we recorded our highest profit to date, is a testament to the resilience and adaptability of our business model.

“We remain optimistic about the future and are committed to leveraging our unique strengths as a thriving financial services ecosystem to create sustainable value for all our stakeholders as we continue to position all our business verticals; Banking, Funds Management, Pension, and Payments, for rapid growth across key markets.”