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

The net interest income of four mid-sized banks in Nigeria surged by 78 percent in 2024 compared to a year earlier, a situation driven by the aggressive rate hike by the Central Bank of Nigeria (CBN), an analysis by BusinessDay shows.

According to the latest unaudited financial statements of the firms, their combined net interest income rose to N938.3 billion in 2024 from N526.6 billion in the same period of 2023.

The lenders, which are listed on the Nigerian Exchange Limited are Wema Bank Plc, FCMB Group Plc, Stanbic IBTC Holdings Plc, and Sterling Financial Holdings Company Plc.

According to their financial results, the net interest income of Stanbic IBTC Holdings Plc rose the highest amounting to N410.4 billion from N175.1 billion, followed by FCMB Group with N225.4 billion from N176.5 billion, Wema Bank amounted to N170.2 billion from N91.7 billion and Sterling Holdco with N132.3 billion from N83.3 billion.

“Banks’ net-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,” a Lagos-based analyst said.

Net interest income is the difference between the interest a bank earns and the interest it pays out to customers.

The growth in net interest income is attributable to the high yield environment brought on by the interest rate raises by the CBN that seeks to rein in rising inflation and lure in capital inflows.

The Monetary Policy Committee (MPC) of the CBN has voted to increase the monetary policy rate six straight times since Olayemi Cardoso became the CBN governor. But at the 299th meeting on February 20, the CBN retained its benchmark interest rate known as the Policy Rate (MPR) at 27.5 percent, following the rebased consumer price index (CPI).

The National Bureau of Statistics (NBS) rebased the CPI reading, which revealed a sharp reduction in Nigeria’s headline inflation rate to 24.5 percent y/y in January 2025 (post-rebasing) compared with the pre-rebasing reading of 34.8 percent y/y in December 2024.

Read also: Four midsize banks’ earnings surge 156% on CBN’s rate hike

Analysts at Comercio Partners said that the retention of the asymmetric corridor at +500/-100 bps around the MPR underscores a commitment to maintaining flexibility while addressing inflation volatility.

The CBN also retained the Cash Reserve Ratio (CRR) for commercial banks by 500 basis points to 50.00 percent and for merchant banks by 200 basis points to 16.00 percent.”

According to the research partners, this is aimed at controlling liquidity in the financial system, curbing excess money supply, and ultimately stifling inflation. However, this policy could have unintended consequences on the broader economy.

Similarly, analysts at Parthian Partners said the MPC’s decision reflects a cautious policy approach in response to prevailing economic conditions, ensuring financial system stability while monitoring inflationary pressures and growth dynamics.

A breakdown of the statements revealed that Stanbic reported the highest net interest growth of 134.2 percent, followed by Wema Bank with 85.6 percent. Sterling Holdco recorded 58.8 percent and FCMB Group had 27.7 percent.