Last year was characterised by intense competition in the banking industry amidst regulatory headwinds which eventually took their toll on the banks' balance sheets. In spite of the tough regulatory measures and tight monetary stance maintained by the Central Bank of Nigeria (CBN), essentially to reduce cost of banking and keep the rate of inflation low, the 2013 full year results of quoted financial institutions released so far showed that a number of banks were, to the admiration of their stakeholders, still able to put up a sterling performance to retain their pre-eminent positions in the industry's ranking.
Using indices like total assets, profit before tax, gross earnings, customer deposits and shareholders' funds, the front runners ranked as Tier-1 banks - Zenith Bank Plc, First Bank of Nigeria Limited (FirstBank), Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA) and Access Bank Plc - remain unchanged.
However, among the Tier-2 banks, the contention was among banks that have challenged the hegemony of the Tier-1 banks and continued to show promise in their delivery in 2013. Banks in this category included Skye Bank Plc, Fidelity Bank Plc and Diamond Bank Plc respectively.
Profit before Tax In the area of profit before tax, the Tier-1 banks accounted for 76 per cent of total profits of the 14 banks under our review, with Zenith Bank emerging the industry leader, declaring N110.59 billion as profit before tax (PBT). In second position was GTB which recorded a PBT of N107.09 billion while FirstBank came third with a PBT of N76.85 billion. However, despite coming second, when the PE ratio is factored, GTB is probably the most profitable bank in Nigeria. In fourth position was UBA with N51.84 billion as profits after tax, followed by Access Bank in fifth position with a PBT of N44.9 billion and Diamond Bank with N32.1 billion as profit after tax in sixth position.
Stanbic IBTC recorded N24.6 as PBT to come seventh. FCMB came eighth with PBT of N18.2 billion, Skye Bank followed with N17.13 billion, while Ecobank Nigeria, which declared a profit before tax of N10.53 billion came tenth. Next was Sterling Bank with N9.31 billion. It was followed by Fidelity Bank, Union Bank of Nigeria Plc and Wema Bank with profits before tax of N9.08 billion, N4.2 billion and N1.9 billion respectively.
Shareholders' Fund Using banks' shareholders' funds as a barometer of banks' performance showed that the Tier-1 banks accounted for 65.4 per cent of the 14 banks that were reviewed. Again, Zenith Bank came in tops with N509.3 billion. It was followed by FirstBank, with shareholders' funds of N350.71 billion. GTBank came third with N332.35 billion and in the fourth position was Sterling Bank with N321.74 billion.
UBA came in fifth position with N259.54 billion, while Union Bank came sixth with N188 billion. Access Bank was in seventh, posting shareholders' funds of N172.5 billion. Fidelity Bank with N167 billion is ranked in eighth place. In the ninth position was FCMB which recorded shareholders' funds of N144 billion, while Diamond Bank with N138.85 billion was in 10th position. Skye Bank which recorded N94 billion as shareholders' funds came 11th position, while Wema Bank and Ecobank occupied the bottom of the table with shareholders' funds of N41 billion a piece.
Total Assets Using the 2013 results, FirstBank showed why it is truly the first ranking first in terms of total assets, where it recorded N3.25 trillion. The bank was followed by Zenith Bank in second position, with total assets of N3.14 trillion. United Bank for Africa Plc, which recorded N2.22 trillion, came third, while GTBank was in the fourth position with total assets of N2.1 trillion. Access Bank, which shot into Tier-1 category last year, was able to maintain its fifth position with N1.8 trillion in total assets. In the sixth position was Ecobank Nigeria Plc with N1.146 trillion, while Diamond Bank, Skye Bank and Fidelity Bank Plc came in the seventh, eighth and ninth places with N1.5 trillion, N1.11 trillion and N1.08 trillion in total assets, respectively.
In tenth place was FCMB which declared a total assets of N1.008 trillion. Sterling Bank ,which recorded N909.4 billion total assets came 11th, Union Bank with N882 billion was 12th, while Stanbic IBTC and Wema Bank took the 13th and 14th positions respectively. In terms of total assets, the top five banks accounted for 53.64 per cent of the 14 banks reviewed in this report.
Gross Earnings In terms of earnings, Zenith emerged as the clear leader, posting earnings of N351.4 billion in 2013 to push FirstBank to the second place with gross earnings of N284.44 billion. UBA came in third, with gross earnings of N264 billion. GTB occupied the fourth position with gross earnings put at N242 billion. Access Bank recorded N207 billion to occupy the fifth position. Diamond Bank came sixth with N181 billion, while FCMB, which declared N131 billion as earning, came seventh. In eighth place was Ecobank with gross earnings of N177 billion; Skye Bank and Fidelity shared the ninth position with N127 billion as gross earnings, while Union Bank occupied the 11th position with N121 billion. Stanbic IBTC came 12th having posted gross earnings of N111.2 billion. Sterling Bank, which posted N92 billion in gross earnings was 13th, while Wema Bank came in 14th. The Tier 1 banks accounted for 57.3 per cent of total earnings of the 14 banks reviewed.
Customer Deposits In terms of the chunk of customer deposits in their kitties, the top five banks accounted for 63.5 per cent of the 14, with FirstBank posting N2.57 trillion as customer deposits for the year under review. It was followed by Zenith Bank at N2.27 trillion, while UBA grossed N1.8 trillion to take third position. GTB, on the other hand, was pushed to the fourth position with N1.44 trillion. Access Bank was in fifth position with N1.33 trillion deposits for the year; Diamond Bank with N1.206 billion occupied the sixth place while Ecobank Nigeria came seventh with N1.118 trillion in deposits.
Leading the pack of Tier-2 banks was Skye Bank, which had N996 billion in deposits to occupy the 8th position. It was followed by Fidelity Bank in the 9th position with customer deposits of N806 billion. FCMB was ranked tenth with deposits of N715 billion, followed by Sterling Bank, which came in 11th with deposits of N570.51 billion. Union Bank was in the 12th position with deposits of N480 billion, followed by Stanbic IBTC posted deposits of N416.3 billion to the occupy 14th position, while Wema Bank was at the bottom of the table with deposits of N217.7 billion.
Numbers Fell An overview of the 14 banks under review showed that that numbers fell within the range of expectations, a development attributed to the regulatory headwinds which have impacted the growth performance of Nigeria banks in recent times. The tough regulatory environment during the year under review, according to chief executive officers of some of the banks, included the decision of the CBN to raise the cash reserve requirement on public sector deposits to 75 per cent from 12 per cent, a reduction and removal of a number of fee income lines such as ATM and CoT charges as well as the increase in AMCON's levy from 0.3 per cent to 0.5 per cent, amongst others.
In spite of these challenges, however, a number of banks were able to meet and exceed market expectations by maintaining good ratios although slight reductions were recorded in some aspects.
Bankers Explain One of such banks with a promising outlook was Access Bank. Giving an insight into the bank's 2013 results, its Group Managing Director, Mr. Herbert Wigwe, said: "Access Bank's 2013 earnings were impacted by several regulatory changes in the Nigerian banking sector. The bank's balance sheet structure during the period further constrained growth and limited the yield on our earnings asset. However, despite the difficult operating environment, the bank grew its loan book to position it for improved earnings, while driving deposit mobilisation from targeted segments to further reduce cost of funds. "We also saw an increase in our non-interest income. As the business continues to grow, risk management remains fundamental to the bank's philosophy evidenced by the reduction in the NPL ratio.
"I am particularly excited about the next phase of the bank's evolution. Having articulated our five-year strategy plan, we began execution by re-aligning our SBUs to ensure that customer service and delivery are improved at all levels. "With our businesses realigned, we are now placing greater emphasis on providing services geared towards women and SMEs in Nigeria, as they underpin the next phase of economic growth. "Infrastructure financing is another key focus for us going forward. Throughout the next phase, we will continue to invest in technology to ensure that we build a customer experience that is both innovative and sustainable."
Similarly, Group Managing Director, Zenith Bank Plc, Mr. Godwin Emefiele, who spoke on the bank's performance in 2013 said: "Our 2013 results testify to our consistency in delivering superior performance and returns, driven by our innovative processes, cutting edge technology and committed staff. Despite the increase in the cash reserve requirement for public sector funds, Zenith Bank's total revenue grew to an unprecedented level of N351billion boosted by a 21 per cent increase in interest income.
"Profit before tax witnessed an impressive growth of 8.3 per cent to N110.59 billion, while total assets increased by 21 per cent to N3.1 trillion. Expectedly, profit after tax declined by 5.33 per cent as a result of increase in income tax charged in the current year compared to FY2012, arising from the "Commencement of tax waivers granted by the federal government on income from bonds and treasury bills in 2012. Our focus on creation of competitively priced high quality risk assets is evident in the year on year growth of loans and advances to N1.2 trillion (25.7 per cent growth) with a marginal increase in cost of risk from 0.94 per cent to 0.97 per cent." For United Bank for Africa Plc, a reduction in profit after tax was attributed to the headwinds that shook the banking industry in the year under review. All our businesses contributed to the strong gross earnings growth, said Phillips Oduoza, Group, Managing Director and Chief Executive Officer of the UBA Group.
"We achieved a good result despite a tough operating environment, demonstrating the strength and resilience of our people and their dedication to implementing our plans in 2013," he explained. Giving some insight into the business behind the bank's earnings, Oduoza said, "Customer-focused, Corporate Banking and Treasury led business model drove the bank's success for the year."
He also identified the bank's African focus, shared responsibility of empowering African businesses through its African network, as well as capital and commitment to excellent service delivery as other drivers of business growth. Oduoza assured stakeholders that the UBA Group had the capacity to continuously evolve and come up with new ways to provide high end and value adding products and services to its customers to enable it to thrive in a tough economic environment noting that the bank's management remain committed to achieving set targets for 2014 by maintaining a disciplined approach to the execution of agreed strategic initiatives.
Pressure on Tier-2 Banks The results of the 14 banks also showed that those most affected by the dip in profit margins in 2013 were the Tier-2 banks. Analysts attributed this to the concentration by some banks on primarily retail business or limited diversification, while others were thought to have been over-exposed to public sector funds, the bulk of which the central bank sterilised. For instance, Diamond Bank, which had in 2012 posted a profit after tax of N27.4 billion recorded an improvement in its 2013 operations, as it declared N32 billion. It also recorded a marginal improvement in its total assets, which hit N1.5 trillion in 2013 as against N1.17 trillion in 2012. Its fees and commission were put at N30 billion whereas N26.5 billion was the figure posted in 2012. For its gross earnings, the bank recorded N181.1 billion up from N139 billion in the preceding year. Fidelity Bank Plc, however, experienced a dip in its profit after tax, which was put at N9.3 billion in 2013 from N21.4 billion in the preceding year. Meanwhile, it recorded an increase in its total assets of N1.1 trillion, against N914 billion recorded in 2012. Its gross earnings for the period were N127 billion, in comparison to N119.14 billion in 2012.
In the case of Sterling Bank Plc, its modest gains in the area of profit after tax in 2012, which stood at N7 billion was imprved in 2013, as the bank recorded N8.2 billion. Its total assets for 2013 were put at N909.4 billion as against N708 billion in the preceding year. Gross earnings was N92 billion in 2013, the figure for 2012 was N69 billion. First City Monument Bank Plc declared a profit after tax of N16 billion in the period under review. In 2012, it posted N15.2 billion. Its gross earnings rose from N117 billion in 2012 to N131 billion in 2013. It recorded N15.2 billion as fees and commissions in 2013, a slight rise from N15 billion in 2012.
The bank's total assets grew from N909 billion in 2012 to N1 trillion in 2013. The story was the same for Skye Bank which declared a profit after tax of N16 billion whereas N13 billion was the figure declared in the preceding year. Total assets grew from N1.07 trillion in 2012 to N1.11 trillion in 2013. Stanbic IBTC was not left out in the regime of suppressed performance, as it posted a profit after tax of N21 billion in 2013, against N10.2 billion in 2012. Its total assets were N763 billion in the period under review, while in 2012 the bank recorded assets of N677billion. The bank's gross earnings were put at N111.2billion in 2013 as against N92 billion in 2012.
Return to Profitability 2013, however, was significant for Wema Bank Plc as it returned to full profitability having recorded a profit before tax of N1.9 billion for the year ended December 31, 2013 as against a loss of N5.9 billion posted in 2012. The return to full profitability came on the heels of the successful completion of the bank's N40 billion Tier-1 capital raising exercise in third quarter(Q3) of 2013. A breakdown of the results showed that Wema Bank ended the year with a total operating income of N20.9 billion in 2013, up 68 per cent from 12.5 billion in 2012. Non-interest revenue rose 25 per cent from N5.6 billion to N7.1 billion, while credit impairment charge improved from N4.9 billion N1.3 billion. Consequently, profit before tax stood at N1.9 billion, while profit after tax was N1.6 billion, compared with a loss of N5 billion in 2012. A further analysis of the results indicated that the bank ended the year with total assets of N331 billion, up from N246 billion; customer deposits improved from N174.3 billion to N217.7 billion; while net loans and advances to customers rose 34 per cent from N73.7 billion to N98.6 billion. Commenting on the bank's performance, the managing director of the institution, Mr. Segun Oloketuyi, said the improved performance followed concerted efforts in implementing the first phase of the bank's turnaround project, despite the increasingly competitive and highly regulated operating environment. "Our transformation plan, Project Leap, a short term growth project with a target of rapidly increasing our market share in our niche segment of retail and SME has started to yield positive results and the bank is on the path of sustainable growth," he said. According to him, the bank recorded improvements in profitability and an increase in customer deposits on the back its retail and commercial businesses. "The capital raising exercise we concluded in 2013 has also increased our capacity to do business and ability to withstand economic shocks. The bank remains committed to improving operational efficiency and focused on containing operating expense growth," he explained.
ranking by profit before tax 01 Zenith Bank N110.59 billion 02 GTB N107.09 billion 03 FirstBank N76.85 billion 04 UBA N51.84 billion 05 Access Bank N44.9 billion 06 Diamond Bank N32.1 billion 07 Stanbic IBTC N24.61 billion 08 FCMB N18.2 billion 09 Skye Bank N17.13 billion 10 Ecobank N11.65 billion 11 Fidelity Bank N9 billion 12 Sterling Bank N9.31 billion 13 Union Bank N4.2 billion 14 Wema Bank N1.9 billion
ranking by shareholders' fund 01 Zenith Bank N509.3 billion 02 FirstBank N350.71 billion 03 GTB N332 billion 04 Sterling Bank N321.75 billion 05 UBA N259.54 billion 06 Union Bank N188 billion 07 Access Bank N172 billion 08 Fidelity N167 billion 09 FCMB N144 billion 10 Diamond bank N138 billion 11 Skye Bank N94 billion 12 Wema Bank N41 billion 13 Ecobank N9.246 billion
ranking by total assets 01 FirstBank N3.25 trillion 02 Zenith Bank N3.14 trillion 03 UBA N2.22 trillion 04 GTB N2.1 trillion 05 Access Bank N1.84 trillion 06 Diamond Bank N1.5 trillion 07 Ecobank N1.146 trillion 08 Skye Bank N1.11 trillion 09 Fidelity Bank N1.08 trillion 10 FCMB N1.008 trillion 11 Sterling Bank N909.4 billion 12 Union Bank N882 billion 13 Stanbic IBTC N763 billion 14 Wema Bank N331 billion
ranking by gross earnings 01 Zenith Bank N351.4 billion 02 FirstBank N284.44 billion 03 UBA N214.27 billion 04 GTB N242 billion 05 Access Bank N207 billion 06 Diamond Bank N181 billion 07 Ecobank N177 billion 08 FCMB N131 billion 09 Fidelity bank N127 billion 10 Skye bank N127 billion 11 Union Bank N121 billion 12 Stanbic IBTC N111.2 billion 13 Sterling Bank N92 billion 14 Wema Bank N26 billion
ranking by customers deposits 01 FirstBank N2.57 trillion 02 Zenith Bank N2.27 trillion 03 UBA N1.797 trillion 04 GTB N1.44 trillion 05 Access Bank N1.33 trillion 06 Diamond Bank N1.20 trillion 07 Ecobank N1.118 trillion 08 Skye Bank N996 billion 09 Fidelity N806.32 billion 10 FCMB N715.2 billion 11 Sterling Bank N570.51 billion 12 Union Bank N480 billion 13 Stanbic IBTC N416.3 billion 14 Wema Bank N217 billion