The Nigerian Banking sector is one of the most competitive sectors in the economy and perhaps the most profitable. Despite having about 23 deposit money banks in the country, only a dozen are listed on the Nigerian Stock Exchange (NSE).
Banking sector performance is something we track regularly at Nairametrics using several well-known metrics. Most of the data can be found in the financial statements of the banks within our repository of reports.
While we track all banks, the following banks are included in our universe of measuring financial performance. They are Access Bank, GT Bank, Fidelity Bank, FCMB, Sterling Bank, FBNH, Union Bank, Zenith Bank, UBA, Stanbic IBTC and Wema Bank.
Best Banks by Total Assets.
In this case, banking assets include equity plus bank deposits. According to the data, 11 of the listed banks reported a combined total asset of N42.4 trillion as at the first quarter of 2020.
This represents a 10.3% rise from total assets of N38.4 trillion as at December. Growth in Total Assets is indicative of how strong our financial institutions are particularly banks.
The size of their total assets also indicates how much support they can give to the Nigerian Economy. At N42 trillion bank total assets represent roughly 29% of Nigeria’s GDP of N145 trillion. That is roughly one-third of our GDP. When you compare to South Africa at 77% and the US at about 62.4% you realize there is room for growth.
So who are the leaders?
First Position – Access Bank N7.28 trillion
Second Position– Zenith Bank – N7.12 trillion
Third Position – FBNH N7.02 trillion
Fourth Position – UBA N6.3 trillion
Banks’ net assets represent the total equity or shareholders’ funds of all the banks on our list. It includes the bank’s share capital, reserves, and its retained earnings in a period. The net asset is a very strong metric for measuring how strong banks are and it is also used by the CBN in assessing banking sector ability to withstand credit losses.
We observed that at the end of Q1 2020, bank net assets rose from N4.64 trillion at the end of 2019 to N4.7 trillion. This presents a 1.4% rise over the three months period. However, this also represents a 20.5% jump from N3.9 trillion posted in 2018. Banks’ net assets are also circa 10% of their total assets.
The top 4 by Net Assets
First Position – Zenith Bank, N925.9 billion
Second Position – FBNH, N680.3 billion
Third Position – GT Bank, N661 billion
Fourth Position – Access Bank, N635.5 billion
Customer deposits are perhaps one of the most competitive banks’ performance metrics to track. The more deposits a bank has the more money it can make. In a country where a lot of cash remains outside the banking system, how well a bank can mobilize deposits from its customers shows how well it can compete in a very aggressive market.
Analysis of the data collected showed that total banks’ deposits rose from N19.1 trillion in 2017 to N29.1 trillion in the first quarter of 2020. Whilst this is impressive growth, it did not adjust for the defunct Diamond Bank.
Thus, a better comparison would be between the N26.8 trillion in deposits recorded in December 2019 and N29.1 trillion in the first quarter of this year. This implies an 8.8% rise in just three months. Listed banks are on track to cross N30 trillion in customer deposits.
Top banks based on deposits
First Position – Access Bank, N5.6 trillion
Second Position – FBNH. N5.4 trillion
Third Position – UBA, N4.6 trillion
Fourth Position – Zenith Bank, N4.4 trillion
Profits After Tax
Corporate Profits are often viewed positively or negatively depending on how you view the impact of capitalism. For banks, it can attract scrutiny if it comes at the expense of small businesses or the wider economy. Nigerian banks reported a total profit after tax of N815.5 billion at the end of 2019. This, compared to N754.7 billion reported in 2018 and N630.3 billion in 2017.
Though banks have often been criticized for reporting fat profits at the expense of the wider economy, we are better off having profitable banks than unprofitable ones. The more profitable banks are (consistently) over time, the more robust they are to support economic growth.
Banks that declared the most profits.
First Position – Zenith Bank, N208.8 billion.
Second Position – GT Bank, N196.8 billion
Third Position – Access Bank, N97.5 billion.
Fourth Position – UBA – N89 billion
Return on Equity
This is another important metric used in assessing how well a bank has performed in terms of returns to shareholders. We consider this the most important in terms of performance and efficiency. You can post the largest profits but just like any regular investment you want to know what that translates to in terms of return on equity capital.
Based on our pool of banks’ data, a return on average asset of 18.1% was achieved in 2019 compared to 17.5% a year earlier. This is higher than the inflation rate for 2019, higher than MPR, and just lower than banks’ lending rate. This figure was 11.39% in the US
How have they performed?
First Position – GT Bank, 31.2%
Second Position – Stanbic IBTC, 27.7%
Third Position – Zenith Bank, 23.8%
Fourth Position – Access Bank, 17.7%.
Return on Average Assets
This measures how well a bank is sweating its assets to generate profits. It is one thing for a bank to have all the assets in its balance sheet but is it providing returns to all providers of capital? We like this metric at Nairametrics because it tells us how well a bank is able to run efficiently using all the resources at its disposal to generate profits for its shareholders.
In general, banks reported a return on total assets of 2.3% in 2019 compared to 2.4% in 2018. Return on Average Assets for US banks was about 1.3% in 2019 and about 1.1% for South African Banks.
Best Banks based on ROAA
First Position – GT Bank, 5.6%
Second Position – Stanbic IBTC 4.2%
Third Position – Zenith bank, 3.4%
Fourth Position – UBA, 1.7%