Jaiz Bank, Nigeria’s only non-interest taking Islamic bank, grew its net profit by 55 percent in 2018, the bank said Wednesday.
Income after tax rose to N834 million, from N537 million in 2017, Hassan Usman, the bank’s Chief Executive Officer, told shareholders at the bank’s 7th Annual General Meeting (AGM) in Abuja.
Jaiz also reported a 25 percent expansion on its balance sheet to N109bn in 2018, having grown steadily by 20 percent in the past few years from just N12 billion in 2012. Its branch network has also grown to 39.
“This shows acceptance,” Usman told the shareholders. “Currently, 50% of Nigeria’s total population are a captive market for such Non-interest Banking services,” he said.
The bank which has a key long term goal of becoming the leader of ethical banking in sub-Saharan Africa also saw its total customer deposits grow to N85bn in 2018 from N68 billion the previous year due to improved customer confidence, according to Usman.
There was also an increase in income-generating assets by 37 percent from N50.64 billion to N69.18bn, despite challenges.
One of those challenges, Usman said at the meeting, was that the bank in 2018 paid out more return to Investment Account Shareholders (IAH)- 37% higher than what was paid out the previous year, which partly suppressed the bottom line targeted for the year.
The calculation and distribution of profit between Mudaraba Investment Account Shareholders and a Bank is one of the central performance metrics in the non-interest (Islamic) Banks.
The CEO explained that the profit-sharing, risk-bearing nature of this kind of investment deposit makes it somewhat a quasi-equity, but unlike equity holders, they do not share in the profit after tax but the gross income.
According to him, “a material change in the deposit mix or the IAH’s participation factor can drastically affect the profitability of an Islamic Bank.”
Until October 2017, the participation factor of IAH in the bank has been 67.5 percent of every naira they deposited, Usman explained.
But thereafter, the factor was changed to 90 percent following a central bank regulation that approved the exemption of Mudaraba Deposits from Cash Reserve Requirement.
“This change in participation factor brought about an increase in profit paid to IAH from N1.4 billion in 2017 to N1.9 billion by 2018. Consequently, profit share paid to them as a percentage of Gross Income from financing and investment grew from 20% in 2017 to 26% in 2018, a growth of about 30%.”
Usman, however said 2019 looks even brighter, and indicted a possibility of dividend pay-out by next year.
He said they were poised to creating a responsible business that better meets their customer needs and puts them first.
He said for an exceptional institution with a humble beginning, and optimistic outlook, the bank will continuously redefine standards, pledging commitment to the development of the Micro, Small and Medium enterprises and that their engagement with the financially excluded would be boldly innovative as well as transformative.
“This is key to our long-term success,” he stressed, noting that pioneering for over seven years had been another key challenge, and wished more partners would come into the market.
In his statement, the bank’s chairman, Umaru Abdul Mutallab, affirmed that the bank’s impressive financials marked the fifth consecutive year of its income growth and profitability.
This, he said was despite a slow global economic recovery and dearth of non-interest banking liquidity management instruments.
He said the board had tried to recommend the payment of dividend for the year, but was constrained by feedbacks from regulators, which meant it was not possible until the bank improved some specific performance benchmarks, including capital buffers, and reduction in non-performing risk assets.
Mutallab however assured that the bank was working assiduously to meet all those regulatory requirements for dividend pay-out to shareholders.
According to him, the bank’s performance in 2018, again, demonstrated its ability to deliver sustainable value for shareholders.
He declared that “2018 was another year of good performance. We have demonstrated that we are pursuing the right strategy in the right market segments.”
Onyinye Nwachukwu, Abuja
