Nigerian mid-tier lenders are fast growing their asset value by expanding their loan books.
Analysis shows that banks like Fidelity and Stanbic IBTC could in the next five to six years overtake some tier one banks in terms of asset size, assuming the big lenders continue being shy to lending.
This projection is based on the assumption that the banks grow into the future at the average annual growth rate in the last three years.
This will see a bank like Fidelity record an asset value of N3.9 trillion in 2024 based on a current average annual growth rate of 15 percent for Fidelity.
Meanwhile, Stanbic IBTC may be positioned to be referred as a tier one bank with the possibility of overtaking big lenders like GTB, Zenith and First Bank in asset value in the years 2022, 2025 and 2027 respectively.
Our projection based on an annual average growth of 26 percent in the asset size of Stanbic IBTC between 2016 and 2018 will see the tier 2 bank record asset value of N4.14 trillion against N3.65 trillion of GTB in 2022, N10.34 trillion against N8.87 trillion of Zenith Bank in 2026 and N13 trillion against N11.52 trillion of First bank in 2027.
“I will totally agree Fidelity and Stanbic IBTC are potential tier one banks,” an analyst who spoke the condition of anonymity told BusinessDay.
“However, when banks grow their assets at a certain level, the pace of increase will not be the same because of an higher base, more so, the banks focus at that level will be how to derive as much value for your asset base rather than just growing it, hence concentrate more on other ratios,” analyst explained further.
Amongst mid-tier banks, Stanbic IBTC and Fidelity grew fastest their asset size at an annual average of 26 percent and 15 percent respectively between 2016 and 2018. While Stanbic IBTC stood as the best performer in the entire banking industry in terms of asset growth, Fidelity on the other hand lagged closely Access bank and UBA which grew within the same period assets by 19 percent and 18 percent respectively.
According to analysts view on the classification of banks into tiers as in Nigeria case, banks are majorly categorized by their asset sizes with banks like Access, GTB, First Bank, UBA and Zenith bank with asset value averaging N4.72 trillion as at December 2018.
Meanwhile, Fidelity, FCMB, Stanbic IBTC, Sterling bank, Union bank, and WEMA bank are classified mid-tier banks as asset size averages N1.3 trillion as at the end of 2018.
Nnamdi Okonkwo, managing director/chief executive officer of Fidelity Bank Plc, disclosed plans by the Nigerian lender to migrate to a Tier-1 bank in the country three years from now.
According to him, 81.5 per cent of the bank’s transactions are now done through digital channels. While the emergence of digitisation first came as a challenge to banks, now it’s an innovation due to the role it has played in facilitating transactions.
Meanwhile in the last 3 years, the Nigerian banking industry have seen tier 1 lenders grow at a slower pace the size of their assets at an annual average of 11 percent aggregately, lagging mid-tier banks asset growth at 14 percent aggregately.
The slowdown amongst tier one banks was seen majorly in 2018, after big lenders began cutting down on their loan books, seizing juicy opportunities in the Nigerian fixed income space when yields were higher.
Amongst banks categorized as tier one or big lenders, Access bank and UBA grew fastest their asset sizes at 19 percent and 18 percent respectively while Zenith, First bank and GTB grew least value of their assets at 8 percent, 8 percent and 3 percent respectively between 2016 and 2018.