Custodian Investment’s earnings up 162% on CBN’s rate hike

Custodian Investment, a Nigerian conglomerate of companies and brands, has recorded a 162 percent surge in its investment results driven by strong investment income powered by Nigeria’s high interest rate hikes.

According to the conglomerate’s unaudited financial statements for 2024, investment results rose to N78 billion from N29.8 billion, aided by an increase in interest income to N34.4 billion in 2024.

“Operating and investment income which consists of interest and rent income, dividends, movements in amortized cost on debt securities and other loans and receivables grew by 66.9 percent to N21.2 billion from N12.7 billion,” the report shows.

The Central Bank of Nigeria maintained a hawkish stance in its plan to anchor inflation and lure in scarce capital. In doing this, it raised its benchmark interest rates six times in 2024 to 27.5 percent.

While the apex bank appears to be winning the fight against inflation, foreign investments are also rising. The interest rate adjustment will raise financial market yields, narrowing the inflation gap and improving real yields.

This will attract foreign investors, increase portfolio investments, enhance FX liquidity, and support the CBN’s interventions to stabilise the exchange rate.

Read also: Four mid-sized banks’ net interest income surge 78% on CBN’s rate hike

Custodian Investment’s interest income from investments measured at amortized cost stood at N29.3 billion, constituting the highest portion of its total interest income.

BusinessDay’s findings show that the conglomerate’s continued outperformance was aided by the current high-interest rate environment, which has already been pivotal in boosting its investment income.

The conglomerate operates Custodian and Allied Insurance Limited, Custodian Life Assurance Limited, Custodian Trustees, Crusader Sterling Pensions Limited, and UPDC Plc.

In the first half of 2024, Custodian Investment forecasted a pre-tax profit of N12.1 billion but delivered N25.75 billion, representing 112 percent of its forecast and a 294 percent year-on-year growth.

However, at the end of 2024, profit before tax rose 135.1 percent to N60.9 billion from N25.9 billion 2023, driven by strong investment results. After-tax profit rose 160.4 percent to N51.3 billion from N19.7 billion in 2023.

Custodian Investment’s core insurance business also contributed significantly, generating N98.2 billion in insurance service revenue, representing over 86 percent of the total revenue recorded for the full year of 2024.

However, insurance service expenses remain a challenge, consuming N61.6 billion of that revenue. Non-life insurance service revenue contributed N66.2 billion while Life insurance insurance service revenue added N31.9 billion.