The combined after-tax profit of eight Nigeria’s mid-tier lenders rose to the highest level since 2015 in the first quarter of 2019, data from company financials of the said banks show.
EcoBank, FCMB, Fidelity Bank, Stanbic IBTC, Sterling Bank, Union Bank, Wema Bank and Unity Bank recorded the biggest combined bottom-line figure of N69.42 billion in Q1 2019, the highest Q1 figure since 2014, with Eco Bank Plc accounting for some 44 percent due to its Pan-African footprint.
The lenders collectively their bottom-line grew some 2.5 percent in first quarter of 2019, compared with 27.8 and 39.9 percent reported in comparable quarters of 2017 and 2018 respectively, although growth slowed.
“A major factor has to be yields. Yields were pretty much high in 2018 that you could about get 17-18% on 1-year treasury bills, but this was not the case in first quarter 2019.” said Gbolahan Ologunro, research analyst, CSL Stockbrokers, claiming that reduced yields lessen the momentum in their profit growth.
Analysis of the lenders’ interest income revealed that lower yields might not be the sole reason for slowed profit growth as five of them including Stanbic IBTC, Wema Bank, FCMB, Fidelity and Unity Bank reported uptick in their interest income on earnings assets.
However, combined interest income earned on assets by the eight lenders shed N7.1 billion or 2.3 percent to N303.1 billion in the review quarter compared with N310.2 billion realized a year earlier, triggered by 15.2 percent dip in Union Bank’s interest income and 7.8 percent cut in that of Eco Bank.
Six of the lenders reported betterment in after-tax profit in the review quarter with Wema Bank leading the pack with 49 percent, driven by 27 percent surge in interest income. The lender recorded uptick in all categories of interest income – cash & cash equivalents (397%), loans & advances (22%) and investment securities (45%).
Behind Wema Bank come FCMB with 40 percent bottom-line growth, Fidelity (28%), Eco Bank (10%), Sterling (5%) and Unity Bank with 4 percent betterment in profit. Laggards are Union Bank and Stanbic IBTC. Both lenders saw their bottom-line dwindle by 0.26 percent and 16.98 percent respectively in quarter one of 2019
Despite tangible contraction in interest income of some of the lenders, they were able to grow profit given the upsurge in their non-interest income. Eco Bank and Union Bank fell in this category.
Pan-African lender, Eco Bank saw interest income on earnings assets dip 7.8 percent to N116.7 billion in the review quarter, but the lender up its bottom-line by 9.8 percent, thanks to double-digit appreciation of 17.8 percent in its non-interest income from N66.3 billion in previous corresponding quarter to N78.1 billion in Q1 2019.
Citing low yield environment, Union Bank’s interest income slumped 15 percent to N26.9 billion in the review quarter, following 25.4 percent and 20.1 percent contraction in interest on loans & advances and investment securities. But the lender’s bottom-line was not significantly battered, owing to its 39 percent surge in non-interest income.
The earnings scorecard of Stanbic IBTC differed from the “interest-income dip & profit growth” pattern in the review quarter.
The lender lagged peers with about 17 percent decline in profit growth even though interest income on earnings assets grew 5.5 percent, owing to massive drop in net impairment write-back on financial assets, and partly by 2.2 percent cut in non-interest revenue.
“The downward revision of the wealth management fees of Stanbic IBTC, which accounts for a large share in their non-interest income. This actually dragged its earnings” explained Ologunro.
The lenders except Stanbic IBTC (-5.1%), Eco Bank (4.7%) and FCMB (0.42%) reported appreciation in total assets.
Wema Bank led the pack with 19.5% growth in total assets to N583.9 billion in the review quarter, trailed by Unity Bank (13.8% to N236bn), Union Bank (10.1% to N1.4trn), Fidelity (8.8% to N1.7trn) and Sterling (2.8% to N1.1trn).
Israel Odubola & Segun Adams
