How Zenith Bank, GTCO outpaced peers in race for liquid assets

Zenith Bank Plc and Guaranty Trust Holding Company Plc (GTCO) were the most liquid banks in the first quarter of 2023, a BusinessDay analysis has revealed.

The two banks recorded a cumulative of N3.69 trillion in Q1 2023, a 59.7 percent increase from N2.31 trillion in the same period of 2022.

“Zenith and GTCO recorded the highest cash and cash equivalents as a result of higher investment securities holdings and higher cash deposits with the Central Bank of Nigeria,” a Lagos-based financial analyst who spoke on condition of anonymity said.

Ngozi Odum, banking analyst at CardinalStone Partners Limited, told BusinessDay that an increase in cash and cash equivalents means better liquidity for both banks.

“However, it depends on where the cash is, if the cash and cash equivalents are earning interest or sitting idly in their accounts,” Odum said. “If they have more money market instruments, they will earn interest on it, otherwise, the cash sits idly in their accounts.”

Zenith Bank recorded the highest cash and cash equivalents of N2.31 trillion in Q1 2023, up 65 percent from N1.4 trillion in the same period of 2022.

GTCO’s cash and cash equivalents stood at N1.38 trillion, a 51 percent increase from N913.65 billion in Q1 2022.

FBN Holdings’ cash and cash equivalents amounted to N1.23 trillion in Q1 2023, a 23 percent increase from N1.6 trillion in the same period of 2022.

United Bank for Africa recorded cash and cash equivalents of N1.14 trillion, representing a 59.7 percent increase from N713.94 billion in Q1 2022.

Stanbic IBTC’s cash and cash equivalents amounted to N617.33 billion in Q1 2023, a 16.5 percent increase from N739.1 billion in the same period of 2022.

Fidelity Bank’s cash and cash equivalents stood at N335.78 billion, up 2.8 percent from N345.39 billion in Q1 2022.

Union Bank recorded N245.78 billion in cash and cash equivalents in Q1 2023, a 28.5 percent increase from N343.67 billion a year earlier.

Wema Bank’s cash and cash equivalents dipped 4 percent to N95.34 billion in Q1 2023 from N99.23 billion in the same period of 2022.

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“The banking sector is a cash-based business and cash most times is not an issue,” Oluwaseun Arambada, a research analyst at FBNQuest, said, adding that a bank’s liquidity level is an appropriate metric to consider.

He said most tier-1 and tier-2 banks have a liquidity position above the 30 percent regulatory threshold.

“A bank can have too much cash or cash equivalents on hand, though. It may be inefficient to sit on these resources instead of deploying them for company growth or rewarding investors with dividends,” Fummi Kuku, a financial analyst, told BusinessDay.

BusinessDay analysis of data obtained from the financial results of nine banks shows that the cash and cash equivalents stood at a cumulative of N8.52 billion in Q1 2023, a 15.4 percent increase from N7.38 billion in the same period of 2022.