Banks set to surpass record performance as deposits rise to N136tr

Total deposit of Nigerian commercial banks have increased to N136 trillion in the first quarter (Q1), 2024 from N115 trillion recorded on December 2023, representing additional new deposits of N21 trillion.

Audited reports and regulatory filings by commercial banks and their holding companies showed that individuals and institutions are increasingly entrusting their funds into the safekeeping and management of Nigerian banks.

Total deposit had risen by 63 per cent from about N70.5 trillion in 2022 to about N115 trillion in 2023.

By the first quarter ended March 31, 2024, total deposits had risen from N115 trillion in December 2023 to about N136 trillion in March 2024, representing an increase of 18.3 per cent. Annualised, the first quarter performance indicated that banks might surpass their 2023 performance this year, underlining the resilience and growth that have characterised Nigerian banking sector.

The Nigerian banking sector runs a uniform business year, which easily provides a birds eye view of the industry performance. Banks use the Gregorian calendar as their business year, thus the business year ends at December 31.

While few major banks traditionally audit their half-year results, which usually end by June 30, banks generally do not audit first quarter results. Banks operational results however go through multi-layered external regulatory reviews including by the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), Nigerian Exchange (NGX) and other relevant agencies.

The data, provided to the NGX and others made available by industry association, showed impressive growths across all cadres and tiers of banks, with the middle tier and newly established banks competing well with the first generation and largest banks.
Banks generally have seen sustained growths in deposits, despite the macroeconomic headwinds including key changes in fiscal and monetary directions.

For example, Zenith Banks total deposit, which had risen by 69 per cent from N8.98 trillion in 2022 to N15.17 trillion in 2023, closed March 2024 at N16.78 trillion. FCMB Group has grown deposit steadily from N2.07 trillion in 2022 to N3.4 trillion in 2023 and N3.7 trillion in first quarter 2024. Premium Trust Bank, a national commercial bank which commenced operations in April 2022, grew deposit base by 382 per cent from N55 billion in December 2022 to N265 billion in December 2023. It closed first quarter 2024 at N309 billion.

Also, Fidelity Banks deposits had risen steadily from N2.58 trillion in 2022 to N4.02 trillion in 2023 and closed first quarter 2024 at N4.71 trillion. United Bank for Africa (UBA)s deposits have grown from N10.86 trillion in 2022 to N14.9 trillion in 2023 and closed March 2024 at N18.4 trillion. Access Holdings had seen a quantum jump from N11.3 trillion in 2022 to N19.8 trillion in 2023 and N24.7 trillion in March 2024.

Sterling Holding Financial Company crossed the N2 trillion mark to N2.15 trillion in first quarter 2024, from N1.4 trillion and N1.8 trillion in 2022 and 2023 respectively.

Guaranty Trust Holding Company (GTCO) has doubled its deposits since 2022, rising from N4.6 trillion in 2022 to N7.55 trillion and N9.2 trillion in 2023 and first quarter 2024 respectively.

A general review of the deposits by banks showed considerable cost management, with banks recording substantial increases in low-cost deposits.

Deposit is a key ratio to measure public confidence and popular participation in a financial services sector. It is the basic building block for a banking sectors funding and liquidity. Deposit size, growth and structure are key analytical instruments for banks examiners and analysts.

The Federal Reserve Board (FRB) described deposits as the primary funding source for most banks and, as a result, have a significant effect on a bank’s liquidity. Banks use deposits in a variety of ways, primarily to fund loans and investments”.

FRB noted that part of a banks management responsibility is to implement programmes to retain and prudently expand the banks deposit base.

The deposit growth underlines the dynamism and effectiveness of banks management as well as growing contributions of banks to the Nigerian economy.

There is a correlational relationship between deposit and loans and expenses, and as such, national economic growth. A report by the Central Bank of Nigeria (CBN) had shown that Nigerian banks loans and supports for the private sector had increased by about N30 trillion over one-year period.

Latest data from the CBN indicated that credit to the private sector (CPS) rose by 65.9 per cent or N29.52 trillion to N74.31 trillion in May 2024 compared with N44.79 trillion recorded in comparable period of 2023.

The growth in lending and supports to the private sector underlined the resilient balance sheet of banks and banks response to the apex banks push for increased lending to bolster economic activities.

The CPS includes loans, trade credits and other account receivables and supports provided by banks to the private sector within a period. The CPS is a global measure of the banking sector’s balance sheet resilience and contribution to national economic agenda.

A month-on-month breakdown showed sustained growth in lending over the past two months with additional credits of N1.39 trillion and N1.71 trillion in May and April 2024 respectively.

Banks lending and support to the private sector rose from N71.21 trillion in March 2024 to N72.92 trillion in April and topped N74.31 trillion in May 2024, representing a month-on-month increase of 1.9 per cent and 2.4 per cent for May and April 2024 respectively.

Beyond lending, the steady growth and resilience in the operations of Nigerian banks have also seen increased tax funding for governments.

Recent data have shown that banks paid more than N1 trillion in taxes to the government over the past two years, with payments in the last audited year accounting for about three-quarters of the total payments.

Banks had seen significant growth in profitability in 2023 with average profit growth in the sector in double digit. The growth in profitability was due mainly to business expansions, but in several instances, boosted by gains from foreign exchange (forex) revaluation gains.

Nigeria had undergone a currency exchange management in 2023, with relative floating of the naira and a market-driven exchange system.