Here are banks with highest interest income growth in H1

Ecobank Transnational Incorporated (ETI), GTCO, and Zenith Bank Plc are the three listed Nigerian lenders that recorded the highest growth in net interest income in the first half (H1)of 2024, data compiled by BusinessDay show.

According to their latest financial statements, the net interest income of ETI rose by 185.77 percent to N763 billion in H1, from N267 billion in the same period of last year. GTCO net interest income grew by 177.40 percent to N491 billion, while Zenith Bank’s jumped 173.95 percent to N715 billion year on year.

United Bank for Africa Plc, Stanbic IBTC Holdings Plc, Access Holdings Plc, FBN Holdings, Wema Bank, FCMB Group, and Sterling Holdco saw an increase of 142.45 percent, 141.67 percent, 129.02 percent, 117.80 percent, 96.88 percent, 47.22 percent and 26.67 percent, respectively.

A further analysis of the statements revealed that the firms’ combined net interest income jumped to N4.07 trillion, from N1.66 trillion in the same period of 2023 .

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

The growth in net interest income is attributable to the high yield environment brought on by the interest rate raises by the Central Bank of Nigeria (CBN) that seek to rein in rising inflation.

The Monetary Policy Committee (MPC) of the CBN has voted to increase the monetary policy rate five times since Olayemi Cardoso became the CBN governor. At the MPC meeting last Tuesday, the MPC raised the benchmark interest rate by 50 basis points to 27.25 percent.

“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,” Tesleemah Lateef, a banking analyst at Cordros Securities Limited, said.

“A loan is given to customers backed by the interest rate during the period. At the current interest rate, it is expected that banks reprice assets to increase the rate to be more beneficial to them,” she added.

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.

“This aggressive stance suggests that further tightening may be on the horizon if inflation remains sticky. The CBN also raised 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 sharp increase 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.

It said, “The aggressive increase in CRR will severely constrain banks’ ability to lend, limiting credit access for businesses and individuals. This tightening of credit conditions could hamper economic expansion, particularly in sectors dependent on bank financing.

“The reduction in lending is expected to slow down economic activity, affecting sectors like manufacturing, services, and construction that rely on credit for growth. This slowdown could be especially harmful in an environment where unemployment has risen from 5% to 5.3 percent,” Comercio Partners said.

Analysis of individual firms

Ecobank Transnational Incorporated

Ecobank’s net interest income increased to N763 billion from N267 billion, the bank’s net interest growth rate rose to 185 percent during the period under review.

Its after-tax profit increased by 196 percent to N311 billion from N105 billion. Its interest income rose to N1.2 trillion from N445 billion.

UBA

UBA’s net interest income increased to N674 billion, up 142 percent from N278 billion.

Its net interest income increased to N1 trillion from N428 billion while after-tax profit fell by 16 percent to N316 billion from N378 billion.

Zenith Bank

Zenith Bank’s net interest income increased to N715 billion from N261 billion.

Zenith’s net interest income growth rate rose to 173.9 percent during the period under review.