Chimara BygoldBy asset, Nigeria’s top five lenders recorded N1.6trillion collectively, as performance in revenue streams differ in the first half (H1) of 2021.
The lenders are FBN Holdings, United Bank for Africa (UBA), Guaranty Trust Holding Company (GTCO), Access and Zenith Bank, commonly known by their initials as FUGAZ.
That compares with the N1.57 trillion posted in the same period of the previous year, representing a 2.7 per cent growth despite the difficult operating environment worsened by COVID-19 pandemic.
However, industry experts reckon that revenues were not particularly strong as a higher interest rate environment in HY2021 meant a higher cost of funds for lenders, which hurt earnings unlike the corresponding period of last year, marked by lower interest rates and lower cost of funds.
Two out of the Big 5 banks reported expansion in gross earnings in the first six months while the rest posted a contraction. This is symptomatic of the difficult operating environment within which banking business was conducted between January and June.
Access Bank, which retained the top spot, grew revenue the most by 13.6 per cent, and that feat was owed in part to reasonable growth in loans and advances within the period.
This helped shore up both interest income, fees and commission income, the same factors that boosted the revenue performance of UBA, the other bank recording improvement in gross earnings.
The other three posted declines in gross earnings primarily on account of a drop in their interest income, with GTCO reporting as much as 7.6 per cent negative growth in top line. FBN Holdings saw both its interest income and fees and commission income crumble by nearly half.
“We’ve seen a sharper than expected contraction in interest income,” said Timchang Gwatau, research analyst at Lagos-based Meristem Securities Limited.
“There were lots of expectations given where we’re coming from last year and given the fact that the yield environment had shown signs of improvement as at the beginning of the year. So there were expectations that interest income was going to do a lot better than we have seen so far.”
PROFIT
IMPROVEMENT in profitability for the period was broader than that of revenue as all the banks but one reported growth. An expansion of 9.4 per cent or N32 billion was reported in the banks’ consolidated profit, standing at N371.1 billion.
Herbert Wigwe-led Access Bank had the strongest profit growth rate at 42.3 per cent, while GTCO reported the weakest rate, which slowed by 15.8 per cent.
Even though Zenith reported the biggest profit of N106.1 billion, it only managed a 2.2 per cent growth.
E-BUSINESS
IN a bid to cushion the impact of dwindling earnings, lenders continued to ride on the e-banking boom that characterised the coronavirus lockdowns of last year, which forced many bank account holders to embrace electronic banking products as a timely alternative to banking hall transactions.
That trend seems to be gaining momentum given that the Big 5 banks reported an increase of 51 per cent in e-business income for half year, with that earnings stream contributing N115.8 billion to their revenues.
Zenith made the fastest advance at 91 per cent, while FBN Holdings, the bank with the slowest growth, was still able to expand by almost one-third
At N29.9 billion, Access earned the biggest income from e-products.
BANKS BY TOTAL ASSETS
THE asset valuation of the Big 5 banks rose 14.1 per cent or N4.9 trillion to N39.9 trillion at the end of June compared to full-year 2020.
With assets worth N10.1 trillion, Access Bank retained its status as the country’s biggest lender by asset and also improved the most at the rate of 15.8 per cent translating to N1.38 trillion in the period.
That had been largely supported by a number of acquisitions it completed in markets within Africa during this time, from Mozambique to Zambia and South Africa.
Zenith posted the smallest asset growth within the period, marginally increasing by 0.4 per cent.
IMPAIRMENTS
EVEN though all the biggest five lenders saw a jump in their asset value, the size of their impaired assets remains a big issue that the independent auditors of some of the banks highlighted in their reports.
The impaired loans (loans whose principal and interest are not likely to be repaid) of the banks rose by 5.3 per cent to N616.7 billion between January and June, a reflection of how much the coronavirus crisis has hampered borrowers’ ability to fulfil their repayment obligations.
Only UBA managed to pare down its impaired assets, which it reduced by 12.7 per cent. FBN Holdings took the hardest hit as its impaired loans worsened by roughly 20 per cent.
At N178.6 billion, Access Bank’s impaired loan figure was the highest in the group but analysts said that may not matter much when considered in light of the fact that its total loans and advances is the biggest at N3.7 trillion.
Zenith, whose impaired assets surged by 10.5 per cent to N151.1 billion, highlighted South West Nigeria as singularly contributing N138.4 billion or 91.6 per cent of that figure. Interestingly, the region also accounts for 70 per cent (N2.1 trillion) of the bank’s N3 trillion loan portfolio.
OUTLOOK
“SLOW growth in lending rates and fixed income yields in H2:2021 are expected to constrain earnings” for banks, Meristem Securities said in its 2021 half-year outlook titled A wobbly Upturn
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