• Sluggish real sector growth raises sustainability question
• Sector urged to diversify, rev-up digital innovations
The top five Nigerian banks by market capitalisation, posted combined gross earnings of N4.5 trillion for their 2022 full-year operations.
The five banks, which are FBN Holdings, United Bank for Africa (UBA), GTCO, Access Holdings and Zenith Bank achieved gross earnings of N4.5 trillion, a 20 per cent growth compared to N3.6 trillion posted in 2021.
But stakeholders at the weekend, expressed fear over the sustainability of the performance, saying the banking sector may not be able to withstand the current poor state of the economy unless government adopts policies that will address the challenges affecting the real sector.
According to them, there is a need for the economy to be properly structured and given a new direction so that all sectors will recover and impact positively on banks.
They argued that banks belong to the service sector that benefits from the performance of the real sector, adding that if the real sector is depressed, it ultimately affects the incomes of the banks.
A breakdown of the gross earnings of the banks for the 2022 financial year showed that Access Holdings recorded the highest figure amounting to N1.4 trillion as against N971.8 billion posted in the corresponding period in 2021.
Zenith Bank followed with N945.5 billion, 24.5 per cent higher than N765.6 billion recorded in 2021. UBA ranked third with a gross earning of N853 billion, up from N660 billion achieved in 2021.
FBN Holdings trailed with N748.6 billion compared with N716 billion recorded previously while GTCO’s gross earnings also rose from N447.8 billion to N539.2.
President of the Independent Shareholders Association of Nigeria, Moses Igbrude, said the growth is an indication that the banking industry has improved despite the harsh operating environment.
However, he noted that the improved performance might not be sustained except the current operating environment, which the manufacturers and operators in the real sectors are contending with, improves.
“I fear that if after dividend payment the economy does not improve, the banks may run into problems because banks have lent much to the private sector.
“Also, sustainability of this trend through good corporate governance is also a key issue that should be the bedrock of the managers of these institutions,” he said.
The Central Bank of Nigeria’s (CBN) loan-to-deposit ratio, which requires banks to increase real sector lending for improved economic growth, is pegged at 65 per cent.
Data from the CBN show that credit to Nigeria’s private sector rose to a record level of N41.8 trillion as of December 2022, representing N6.61 trillion in net loans compared to N35.19 trillion as of the beginning of the year.
For 2023, credit to the private sector rose N1.6 trillion month-on-month (MoM) or four per cent to N43.06 trillion in Marc from N41.5 trillion achieved in February.
President of Ibadanzone Shareholders Association of Nigeria, Eric Akinduro, said banks should invest more, leverage digital online solutions to make transactions more seamless and boost their business.
“It is a good sign for the investment community. Last year appeared better than the previous year because of what we experienced during the COVID-19,” he said.
He urged government to provide a favourable business environment to boost the operations of companies in the real sector.
Chief Executive Officer of Wyoming Capital and Partners, Tajudeen Olayinka, said: “That is the usual trajectory for businesses in the banking sector, as they can adjust to the variability of costs and cost pressures in the short-run to stay afloat.
“In this instance, they must have adjusted to inflationary pressure and rising interest rates in addition to the fact that the business is a portfolio of multiple business opportunities in an economy.”
