Bulge Balance Sheet Banks Battle for Supremacy
Analysis of statements of financial position of Tier-I banks shows that their combined assets hit N26.797 trillion from the beginning of the year to date, having expanded by 8.78% from N24.633 trillion.
However, less than 13% of the total assets was financed with Tier-I bloc shareholders’ fund. The five banks’ total shareholders’ value hit N3.283 trillion, which represents a 12.25% increase year to date.
The recent earnings release from the top big banks signals a renewed earnings rivalry as operators battle for top position in the banking sector.
This corporate rivalry had forced top bank chiefs to have adopted various strategies to ensure they cut the big chunk of the pie available in the economy.
Earnings sources differ by design, some banks gunned for increased risk assets, and others played smart investing in gilt-edge securities with lower risk to suit their appetites.
Specifically, the earnings season shows that in the 9 months of the financial year 2019, ACCESS Bank Plc leads the ranking in terms of gross earnings, followed by Zenith International Bank Plc.
Despite macroeconomic headwinds, these bulge balance sheet banks’ combined gross earnings for the financial year 2019 hit about N2.162 trillion.
This represents a 2% increase when compared to about N2.125 trillion made by the banks in the comparable period in 2018.
Analysts however observed that Access Bank, Zenith Bank, First Bank of Nigeria Holdings, United Bank for Africa and Guaranty Trust Bank Plc competitive business and financial strengths differ based on size, focus and asset allocation.
The results revealed that the banks’ ability to manage cost, operational efficiency and size of business transactions affected the bottom line.
In the period, the top banks were able to convert 24.12% of their combined earnings as distributable profit. In the period, the five banks recorded N521.729 billion combined profit after tax.
Meanwhile, a year ago, these Tier I banks’ combined earnings was about N2.125 trillion. Of the sum, 21.44% was converted to profit after tax which translated to N455.835 billion.
MarketForces reported that in the first half of the year, these bulge balance sheet banks crowded out Tier II banks significantly in terms of size of deals, and profitability.
The big “5” accounted for more than 80% of the industry earnings, a situation that analysts attributed to differences in financial muscles and deals capabilities.
ACCESS, Zenith, and FBNH ranked ahead in terms of gross earnings size. However, in terms of profit, Zenith leads the pack followed by GTBank and then ACCESS.
In the rating on the ability to convert revenues to profit, GTBank ranked ahead followed by Zenith Plc. The analysis of the number also shows that Zenith Plc ranked top in terms of share of the industry’s profit while GTBank and ACCESS Bank ranked second.
In their individual results for the 9 months of the financial year 2019, GTBank’s gross earnings pitched at N326.144 billion, which represents a 3% decline from N334.72 billion the bank achieved in the comparable period in 2018.
However, the bank raised profitability despite the fact that revenues nosedived. Its profit after tax settled at N146.99 billion, a 3% uptick when compare with N142.224 billion in a similar period in 2018.
Zenith Plc.’s gross earnings increased by 3.5% from N474.61 billion to N491.268 billion at the end of 9 months of the financial year 2019.
The results show that the bank profit after tax also followed the same trend. Post-tax profit expanded 4.5% year on year to N150.7 billion. In the comparable period in 2018, Zenith Bank had raked in N144.2 billion.
UBA seems to be the most aggressive bank that increased gross earnings by a whopping 13.6% from N357.1 billion in September 2018 to N405.5 billion a year after.
Meanwhile, at the bottom line, UBA’s profit after tax surged 32.3% from N61.6 billion to N81.6 billion due to lower impairment charges on credit losses booked in the period.
Also, FBNH’s gross earnings closed the period at N426.2 billion, having dropped marginally from N430.8 billion in the comparable period. At N51.7 billion, its profit after tax jerked up by 15.3% from N44.9 billion level attained in 2018.
ACCESS Bank’s gross earnings berthed at N513.655 billion at the end of 9 months period in the financial year 2019. This represents 3% decline when compared to N528.744 billion the bank made in 2018.
Profit after tax however expanded by 44.23% from N62.911 billion to N90.739 billion in the period under review.
Among the big five banks under review, ACCESS Bank Plc accounted for 23.75% of the aggregated earnings, followed by 22.71% share of the market by Zenith Bank Plc.
Read: https://dmarketforces.com/tier-i-banks-stock-performance-in-red-record-negative-returns/
While FBNH accounted for 19.71% of the total, UBA cut was 18.75% of the total earnings. The remaining 15.08% went to GTBank Plc. The review of the combined profit after tax shows that the top banks raked in N521.729 billion in the 9 months of the financial year 2019.
The numbers show that Zenith Bank Plc accounted for 28.88% of the Tier I banks’ profit after tax to lead the pack, followed closely by GTBank which accounted for 28.17% of the total profit.
ACCESS Bank Plc cut 17.39%, while UBA’s share of the pie was 15.64% and the lowest in the rank was FBNH which took 9.91% of the sum.
Many of the Tier I banks with bulgy revenue found it difficult to convert to profits. Analysts observed pressure on earnings from funding costs and the size of operating expenses.
GTBank maintained industry cost leadership as the bank was able to convert more than 45% of its gross earnings to profit after tax.
Zenith bank came second in the rank; converted 30.67% of its total earnings to distributable profit. For UBA, the group was able to convert 20.12% of its gross earnings to distributable profit.
ACCESS Bank achieved a conversion rate of 17.67% while FBNH converted 12.13% of its N426.2 billion to distributable profit in the period. Read Also: Nigerian Banks Battle Liquidity Shortfall, Borrow from CBN Facility
