Twelve Nigerian banks have so far reported audited financial results for full year 2013 and we have decided to take a deeper look at their financials to see which bank is the market leader and which ones are underperforming.
Guaranty Trust Bank (GTB) is the clear leader in the Nigerian banking space as the lender tops the charts with respect to Return on Average Equity (RoAE), and Return on Average Assets (RoAA) of 29 percent and 5 percent respectively.
The banks remarkable efficiency is revealed by its ability to churn out N107.9 billion in pretax profits (PBT) almost double UBA’s N56.05 billion, even as its gross earnings of N242.2 billion were less than UBA’s gross earnings of N264.6 billion.
On the flip side, Fidelity Bank is the worst performer (among the group), returning just 5 percent on ROAE, and 1 percent on ROAA.
Fidelity also has the lowest overall PBT of N9 billion, on gross earnings of N126.9 billion. The banks underperformance is stark when compared with fellow tier-two lender Stanbic IBTC, which made N24.6 billion in pretax profits on N111.2 billion of revenues for 2013.
Regulation curbs profits forcing banks to change model
Nigerian banks grew profits at a slower rate in 2013, compared with 2012.
The Central Bank of Nigeria (CBN) increased CRR on public sector deposits to 75 percent from 50 percent last year and also told lenders to lower fees and commissions to reduce costs to customers.
The regulator raised requirements on private deposits to 15 percent from 12 percent on March 25 to reduce liquidity and support the naira.
As a consequence of tighter CBN regulations banks lent a larger portion of their deposits in 2013 compared to 2012.
The banks had hitherto preferred to invest in Government bonds and make huge profits on the margin between the interest rates they pay on deposits and interest they earn from bonds and Treasury-Bills.
Nigerian Banks however still look attractive as they have a long time to ride a secular growth wave of an under banked but increasingly wealthier population in need of financial services.
GTB, Diamond Bank and UBA are our top picks out of the group.