The combined interest income reported by seven of Nigeria’s deposit money banks grew 25 percent in 2022, almost triple the 8.9 percent growth recorded in the previous year, on the back of bumper rate hikes, data collated by BusinessDay show.
The data were collated from the full-year 2022 financial statements that have so far been released by the banks listed on the Nigerian Exchange Limited.
The Central Bank of Nigeria (CBN) raised its benchmark interest rate four consecutive times last year to 16.5 percent from 11.5 percent in May.
The United Bank for Africa Plc, Zenith Bank Plc, Ecobank Transnational Incorporated (ETI), Fidelity Bank Plc, FCMB Group, Stanbic IBTC Holdings Plc and Wema Bank Plc saw their interest incomes rise last year.
The seven banks’ cumulative interest income amounted to N2.54 trillion in 2022, up from N2.03 trillion in the previous year.
“Banks’ interest income, which is the core income from loans and advances to customers, investment securities and cash and cash balances, are mostly driven by interest rate hikes,” Tesleemah Lateef, banking analyst at Cordros Securities Limited, said.
“A loan is given to customers which is backed by the interest rate during the period. At the current interest rate, it is expected that banks reprice assets, which is to increase the rate to be more beneficial to them.”
Fidelity Bank’s interest income jumped 48.4 percent to N277.26 billion in 2022 from N186.78 billion in 2021 while that of Stanbic IBTC’s rose 45.7 percent to N152.67 billion in 2022 from N104.75 billion.
Wema Bank’s interest income grew by 39.5 percent to N104.39 billion from N74.8 billion, while that of FCMB increased by 35.5 percent to N219.55 billion from N162.04 billion.
Zenith Bank reported N540.17 billion interest income for 2022, up 26.3 percent from N427.6 billion in the previous year.
UBA’s interest income increased by 17.4 percent to N557.15 billion from N474.26 billion, while that of ETI, the parent company of Ecobank Nigeria, grew to N690.54 billion from N603.37 billion.
Coronation Asset Management, in a report titled ‘Nigerian Banks: A year of resilience and grit’, said the CBN’s interest rate hikes, together with a rise in government borrowing, drove lending yields upwards and banks’ net interest margins (NIMs).
It said NIMs across the tier-1 banks advanced higher by 50 basis points year-on-year, on average, as at September 2022, although with variations from bank to bank.
“We expect modest FY 2022E performance upside for most of the banks featured here, driven by improved asset yields, although capped by ongoing cash reserve ratio debits. We expect earnings support from strong growth in non-interest revenue,” the report said.
Coronation analysts expect the Nigerian banking industry to face pressures stemming from stringent regulations, high inflation, continuous dollar shortages and even asset quality issues in 2023.
“Nonetheless, we expect modest growth in earnings from the banks featured, driven by rising interest rates, a strong contribution from non-interest revenue derived from FX revaluation gains, growth in non-bank businesses and digital banking,” they added.