Analysis of the audited full-year 2023 results and first-quarter (Q1) 2024 results of Deposit Money Banks (DMBs) reveals that banks in the country generated substantial returns for their shareholders despite the economy’s slow growth.
Nigeria’s Gross Domestic Product (GDP) grew by 3.46 percent year-on-year in real terms in the fourth quarter of 2023.
Similarly, GDP growth was 2.98 percent year-on-year in real terms in the first quarter of 2024.
This growth rate was higher than the 2.31 percent recorded in Q1 2023 but lower than the 3.46 percent growth in Q4 2023.
However, Nigerian Tribune’s analysis indicates that the banks recorded a growth of 216.4 percent, highlighting a significant gap compared to the Q4 3.46 percent GDP growth.
In their cumulative audited 2023 results, six lenders generated about N3.11 trillion profit before tax, compared to N982.5 billion in the 2022 financial year.
The banks are: Zenith Bank Plc, Access Holdings Plc, United Bank for Africa Plc (UBA), Guaranty Trust Holding Company Plc (GTCO), Stanbic IBTC Holdings Plc, and Wema Bank Plc.
Further findings show that these six banks generated N2.6 trillion profit after tax in 2023, a growth of 224.4 percent from N807.65 billion reported in 2022.
Additionally, data from earnings reports reveal that the combined interest income of eight listed banks nearly doubled to N1.91 trillion in Q1 2024 compared to the same period in 2023.
The Central Bank of Nigeria (CBN) hiked interest rates by 600 basis points (bps) between February and March to a record high of 24.75 percent, leading to substantial gains for Nigerian lenders.
However, businesses that borrowed significantly from these banks are feeling the stress as repayment obligations have sharply risen.
The surge in interest income, a measure to curb high inflation—which increased to 33.2 percent in March—coupled with forex gains due to the devaluation of the naira, enabled lenders to post higher profits.
“For me, those interest incomes are not the kinds of things we can celebrate,” said Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. “From a development point of view, this reflects the significant pressure of high interest rates on economic operators.
”Even the Bank of Industry (BOI), Nigeria’s oldest development finance institution, posted its highest profit in its 22-year history in 2023 as the lender increased credit to businesses in Nigeria.
BOI’s profit before tax grew by 117.69 percent (N70.7 billion) to N153.81 billion, the highest since its establishment in 2001.
Loans and advances jumped 41.5 percent to N1.14 trillion from N803.6 billion the previous year due to increased interventions and disbursements to enterprises.
BOI is expected to grow its loan book further this year, according to Danaging Director Olasupo Olusi.
Among the eight listed lenders analyzed, Access Holdings, the parent company of Access Bank, saw the most significant increase in interest income, raking in N719.59 billion in Q1 2024, up 183.06 percent year-on-year.
Its profit before tax jumped to N202.74 billion from N81.74 billion.
Guaranty Trust Holding Company, which owns GTBank, boosted its interest income by 170.61 percent to N281.65 billion and reported a pretax profit of N509.35 billion against N74.09 billion a year earlier.
Zenith Bank’s earnings grew to N320.19 billion from N86.61 billion as its interest income surged by 155.1 percent to N488.55 billion.
Despite the slow economic activity, United Bank for Africa more than doubled its profit to N156.34 billion, with interest income rising by 129.71 percent to N440.76 billion.
The interest incomes of Stanbic IBTC Holdings, Wema, FCMB Group, and Fidelity increased by 129.67 percent, 104.89 percent, 89.87 percent, and 88.31 percent, respectively.
An analysis of bank balance sheets in Q1 2024 shows that substantial profits, while partly driven by rising interest rates, were also bolstered by fair value gains on financial instruments held by the banks.
A bank customer, Mr. Ojo, expressed his confusion: “I have always wondered how banks in the UK make profits. Withdrawal is free, deposit is free, transfer is free, debit card is free, ATM withdrawal is free, cheque is free.
“Despite all these, they make millions of pounds in profit each tax year. I work in a bank, so I know. Can someone tell me what exactly is happening in Nigeria?”
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