Top four banks earn N8tr in 12 months, record N3.5tr FX gain

Four leading Nigerian banks by market capitalisation, achieved combined gross earnings of N7.99 trillion gross earnings in their 2023 full-year operations, a figure that is 248 per cent higher than the 2022 performance.

The four banks – Access Holdings Plc, Zenith Bank Plc, United Bank for Africa Plc and Guaranty Trust Holding Company Plc – posted gross earnings of N7.99 trillion, over triple of N1.3 trillion recorded in the corresponding period in 2022.

The banks also recorded significant foreign exchange (FX) revaluation gains during the period estimated at N3.5 trillion.

The significant growth in revenue for the banks is, however, attributed to the impacts of the sizable revaluation gains arising from the harmonisation of currency exchange rates.

Experts said the FX revaluation gains reported by most of the banks will most likely not happen in that magnitude in the 2024 financial year as there seems to be some level of stability in the FX market.

Head of Research, FSL Securities, Victor Chiazor, stressed the need for investors to focus on the banks that were able to grow their income around their core business areas like interest income and fee and commission income for the 2024 financial year.

According to him, these income lines would be where the bulk of the revenue from banks would be generated in the current financial year.

“Going forward, we do not expect the naira to weaken significantly as witnessed in 2023, which would mean that such revaluation gains would not be reported.

“The CBN’s policy which stopped banks holding long-term dollar positions, the use of foreign currency as collateral for loans as well as the re-introduction of BDCs to the market are all expected to improve FX liquidity in the system and reduce the pressure and demand for dollars,” he said.

Head Equity, Planet Capital, Paul Uzum, said the performance is a one-off event caused by the massive devaluation of the Naira last year.
He pointed out that some FX devaluation gains would be recorded in the first quarter (Q1) 2024 due to the devaluation of naira in the first quarter of this year.

However, he stated that this strong performance would not be sustained in the 2024 operations, the reason banks were directed by the CBN not to pay from the gains earned on FX.

An investment banker, Tajudeen Olayinka, said a lot has changed between the time these banks finally closed their books for the 2023 audit and when the results were released.

He pointed out that there would be a moderate reversal of the strengths the banks exhibited in their 2023 accounts when they publish their Q1 and Q2 scorecards.

“The same modest recovery will happen to those real sector businesses that experienced losses due to net dollar liabilities. The (worsening) or improvement will cut across the spectrum of businesses in the economy.”

President of New Dimension Shareholders Association of Nigeria, Patrick Ajudua, said: “Shareholders commend the tier one banks for exceptional financial performance which saw revenue reach N7.99 trillion in 2023 and N3.5 trillion FX gain.

He added that performance would be sustained with improved fiscal and monetary policies which would meet the expectations of stakeholders and translate to a positive recapitalisation exercise.

A breakdown of gross earnings of the banks for the 2023 full-year performance showed that Access Holdings recorded the highest figure amounting to N2.6 trillion, as against N1.4 trillion posted in the corresponding period in 2022, representing 80 per cent growth.

The bank posted an FX revaluation gain of N628.9 billion, up from N335.5 billion posted in the previous year.

Following Access in the full-year performance was Zenith Bank with N2.13 trillion, 125.4 per cent higher than N945.5 billion recorded in full year, 2022.

Zenith Bank achieved N228.9 billion FX revaluation gain, up from N25.2 billion posted in 2022.

UBA ranked third with 143 per cent increase in gross earnings to N2.08 trillion from N853.2 billion achieved within the same period in 2022. Its FX revaluation gains also stood at N2.2 trillion in 2023.

GTCO also trailed with N1.18 trillion, representing 120.03 per cent growth when compared to N539.3 billion recorded previously, alongside revaluation gain to the tune of N449.3 billion.