Forex Transaction Gains Trigger 9 Banks To N2.29trn Profit

Gains from the foreign exchange transactions triggered nine financial institutions publicly-listed on the Nigerian Exchange (NGX) to a total profit before tax of N2.286 trillion in nine months of 2023.

Data obtained from the Nigerian Exchange showed that; Zenith Bank, United Bank for Africa (UBA), Guaranty Trust Holding Company (GTCO), Access Holdings, FBN Holdings, Stanbic IBTC Holdings, Fidelity Bank, Wema Bank and Sterling Financial Holdings Company posted a combined profit before tax of N2.286 trillion in H1 2023, compared to N893.8 billion in the same period of 2022, having year-on-year gain of 155.70 per cent.

Zenith Bank posted the biggest pre-tax profit, accounting for N505.04 billion of the N2.286 trillion. UBA grew profit by 262.5 per cent to N502.1 billion, while GTCO profit before tax stood at N433.2 billion in Q3, 2023.

While, Access Holdings, FBNH, Stanbic IBTC Holdings, Fidelity Bank, Wema Bank and Sterling Financial Holdings Company achieved a pre-tax profit of N294.5 billion, N270.3 billion, N129.5 billion, N110.99 billion, N22.1 billion and N17.80 billion respectively in nine months, 2023.

Speaking on the performance, the chief operating officer of InvestData Consulting, Mr Ambrose Omordion said,  the monetary policy is favouring the banks, saying, the banks in Nigeria are disclosing record profits due in part to a flexible exchange rate regime that saw the country’s currency sharply devalued.

He noted that, “most tier-one banks have international affiliations, with a significant portion of their assets denominated in dollars. As a result, the devaluation has led to a substantial increase in their profits.”

Going forward, Omordion said: “We expect the banks to continue their upward trajectory. This will be supported by sustained contributions from interest and non-interest incomes for topline and bottom-line growth.

“This is due to our belief that the elevated global interest rate environment will continue till the end of the year. Also, the Bank’s solid operational environment management, despite challenging macroeconomic conditions, will ensure overall profitability. This, coupled with most of the Banks’ solid dividend payment history, will drive positive investor sentiments towards the listed corporates.”

The vice president of Highcap Securities, David Adonri said: “The banks’ profitability growth can be attributed to the exchange rate wing fall from the floating of the naira. Beyond that the hike in interest rate which increases their interest income and with the end of naira cash scarcity more cash transactions were undertaken by the banks.”

He explained that the banks were also able to manage their costs, saying, the combination of high income and cost effectiveness leads to their huge profits.

Going into 2023 end year, analysts stated that, “we are optimistic that the combined impact of the elevated yield environment, revaluation gains recorded in the year, and the CRR reduction for merchant banks from 32.5 per cent to 10.0 per cent will support the Banks’ earnings growth.”

Speaking on the result, Group managing director/ chief executive officer of UBA, Mr. Oliver Alawuba said, “the Bank results showed a strong and sustainable improvement in key performance metrics over the period. The Group recorded robust double-digit growth in its top line in September 2023.

“Despite the high inflationary and challenging global environment, the Group was able to leverage the rising interest rates environment in our markets and improved digital offerings, in growing funded and non-funded income. I am particularly excited by the 263 per cent YoY growth in profit before tax, which has helped to drive increased returns to shareholders, with a 44.4 per cent RoAE, compared to 19.7 per cent achieved as at December 2022.”

Alawuba added that, “we continued to record improved gains in our customer acquisition and retention strategies across our countries of presence. For 2023, we remain committed to improving the Group’s performance, as we strategically position to take advantage of emerging opportunities, in our 24 countries of operation and across the globe. We will continue to deliver excellent rewards to our stakeholders.”