Five Tier-1 banks declare N1.6trn gross earnings

Five Tier-1 banks have declared N1.611 trillion gross earnings in their half year audited results for the period ended June 30, 2021.

The top banks in this universe are Zenith Bank Plc, Access Bank Plc, FBN Holdings, United Bank for Africa and GT Holding Company (GTCO). Gross earnings are the total amount of income earned by these banks from January 1, 2021 to June 30, 2021.

However, competition for market shares, asset quality and customer base created wide gaps between each of the banks’ results. The banks achieved these results despite tough economic environment and regulatory guidelines that reduced financial institutions income lines and profitability through rates control.

In a report: ‘Nigerian Banks: Resilience Built In’, analysts at Coronation Research, disclosed that this year rates are heading back up again with 1-year Nigerian Treasury Bill (T-bill) rates have risen from 0.65 per cent in January to 9.77 per cent recently.

“The rate at which banks lend to each other, the interbank rate, has also gone up sharply, with 1-month Nigeria Interbank Offered Rate (NIBOR) rising from 0.54 per cent in January to 12.55 per cent recently.”

“Financial institutions that depend on short-term funding in the marketplace, and that have relied excessively on duration trades for their asset yields, could be facing problems this year,” the analysts predicted.

GTCO’s audited half-year result for the first half of this year showed N207.91 billion gross earnings, a drop from N225.14 billion it achieved in the corresponding period of 2020. The decline in the banks earnings followed drop in net interest income from N127.62 billion in 2020 half year to N107.06 billion in 2021, representing 16.11 per cent decline. The bank’s operating expenses also rose, leading to decline in profit before tax by N166.58 million to N93.06 billion, while earnings per share dropped to N2.79 from N3.32.

Analysts at Coronation Research, said: “The pass-through of rising interest rates on customer loans may become evident in the third quarter numbers, potentially restoring Net Interest Income. The recent fall in market interest rates may also help this happen. Combined with the remarkable rise in Net Fees & Commissions, there is the potential for earnings to recover”.

FBN Holdings gross earnings stood at N291.2 billion. FBNH however, earned significant revenue from commissions which rose from N46.7 billion to N57.3 billion helping it compensate for the lower-income earned from interest on loans. FBNH also showed strong growth in net earnings from commission and fees moving from N46.7 billion to N57.3 billion.

United Bank for Africa (UBA) gross earnings stood at N316 billion during the period under review. The gross earnings was a significant increase from N300.6 billion it achieved in the first half of 2020. Its assets growth was also significant, from N7.7 trillion to N8.3 trillion. UBA recorded a much lower loan impairment going from N7.8 billion last year to N4.1 billion in the period under review. Deposits by customers crossed the N6 trillion mark as well, growing by 7.4 per cent to N6.1 trillion in the period under review, compared to N5.7 trillion as of December 2020. UBA also recorded significant growth in its net commissions and fees income growing from N38.5 billion to N45.7 billion.

Zenith Bank gross earnings for the half-year of 2021 stood at N345.6 billion. The gross earnings showed a decrease by 0.15 per cent from N346.09 billion in same period of 2020. The bank’s interest income declined from N216.9 billion in the first half of 2020 to N203.9 billion same period this year. Zenith also reported a significant increase in net commission and fees growing from N33.5 billion to N47.6 billion. This helped mitigate the drop in interest income.

Zenith also had a higher net interest income, grew its customer deposits to N5.7 trillion in 2021 from N5.3 trillion at the end of 2020.

Access Bank posted N450.6 billion gross earnings during the the first half of this year. The figure represents 13.6 per cent, growth from N396.7 billion achieved in same period of last year. Access Bank had aggressively increasing its loan book from N3.6 trillion to N3.9 trillion. However, the most significant impact on gross earnings was its earnings from commission and fees which rose to N58.7 billion from N40.5 billion. Access Bank appears to be leveraging on its asset base to drive revenue growth. While the bank raked in billions in gross earnings, its loan losses remained high at N28.6 billion in the first half of this year compared to N29.6 billion incurred last year. “Access Bank clearly transformed itself with its acquisition of Diamond Bank, which was completed and consolidated in 2019,” the analysts said.