Twelve Nigerian banks grew profit 3 percent in the first three months of the year at N262.1billion from N253.87billion amid regulatory headwinds that have continued to squeeze lenders’ deposits with the Central Bank of Nigeria (CBN) and the impact of COVID-19 in the latter part of the period.
Nigeria’s biggest bank by asset, Zenith Bank’s net profit increased slightly to N50.5billion in the first quarter as against N50.23 billion recorded in the same period in 2019. Nigeria’s most capitalised bank, Guaranty Trust Bank’s profit after tax stood at N50.1billion as against in N49.3 billion recorded Q1 2019; Access Bank, Nigeria’s biggest bank by customer base recorded N40.9billion in the first period as against N41.14billion in Q1 2019; United Bank for Africa made a total of N30.1billion compared to N28.66 made in Q1 2019 while First Bank, Nigeria’s oldest bank recorded N25.7billion in profits compared to N15.7billion made in Q1 2019.
Other banks such as Stanbic IBTC recorded N20.6billion in profits from N19.15billion recorded in the first quarter of 2019; Ecobank recorded a sharp decline in profits to N24.3billion from N30.58billion recorded in Q1 2019; Fidelity Bank recorded a decline in net profit at N5.8billion from N5.9billion recorded in the first quarter 2019; Sterling Bank recorded N2billion in the first quarter a decline compared to N3.2 billion recorded in the same period the previous year; Union Bank recorded N6billion compared to N5.27billion recorded in Q1 2019; Wema Bank recorded N977million as against N1.1billion recorded in Q1 2019.
The apex bank introduced a minimum loan-to-deposit ratio (LDR) for banks in the country in July 2019, according to the CBN this is to stimulate lending to the real sector and drive economic growth. At the introduction in July 2019, banks were mandated to maintain a minimum LDR of 60%; however, this was increased to 65% in September 2019. 12 Defaulting banks were later penalised N499.1billion by the bank in October last year, it also debited the banks N600billion for failing to meet the new LDR threshold set by the apex bank, thus depriving the banks of any interest that would have earned on such deposits.
During the monthly Monetary Policy of the CBN, it raised the Cash Reserve ratio of banks in the country by 500 basis points to 27.5percent, the cash reserve requirement is the minimum amount banks are expected to retain with the CBN from customer deposits.
According to the CBN, the raise became necessary in a bid to tame inflationary pressure in the economy. It, however, wielded the big stick again in April when it debited 28 commercial banks and merchant banks a whooping N1.4trillion for failing to meet the CRR requirement, just last week, the CBN debited some banks a total of N459.7 billion for failure to meet CRR requirement.
Going forward, earnings from the Banking industry’s core business is expected to decline in the short term on account of an expected rise in impairment charges, lower yields on the loan book and a contractionary monetary policy stance, exacerbated by discretionary cash reserve requirement (CRR) debits by the regulator.