In a bid to have more liquid assets to pay off current liabilities, the biggest banks in Nigeria have collectively reported a 39.97 percent increase in total cash and cash equivalents reported in the nine-month period of 2022.
The banks include First Bank, United Bank for Africa, Guaranty Trust Holding Company, Access Bank, and Zenith Bank.
Data sourced from the Nigerian Exchange Limited showed Cash and investment securities collectively reported by tier-one banks grew to N7.48 trillion in the nine-month period of 2022 from N5.34 trillion in the nine-month period of 2021.
Cash equivalents are investment securities that are meant for short-term investing; they have high credit quality and are highly liquid.
Ngozi Odum, banking analyst at CardinalStone Partners Limited stated that an increase in cash and cash equivalents means better liquidity for the banks.
“However, it depends on where the cash is. If it is earning interest or sitting idly in their account. If they have more money market instruments, they would earn interest on it, otherwise, the cash sits idly in their accounts,” she added.
Findings by BusinessDay show that tier-one banks have more money market placements than cash in their accounts. Aggregate money market placements reported by these banks amounted to N2.29 trillion in the nine-month period of 2022, while total cash held by the banks amounted to N1.97 trillion in the same period of 2022.
Bank Analysis
Zenith Bank
Zenith Bank reported the highest cash and cash equivalents amongst its peers amounting to N1.91 trillion in the nine-month period of 2022, up 96 percent from N973 billion reported in the nine-month period of 2021.
Furthermore, a breakdown of the cash and cash equivalents reveals treasury bills accounted for the larger chunk of its cash and cash equivalents for the period. The bank’s cash and cash equivalents comprise treasury bills amounting to N1.18 trillion, cash and bank balances with the CBN (less mandatory reserves) totaling N177 billion, and due from banks worth N552 billion during the period.
The movement of its cash and cash equivalents shows that Zenith Bank generated N1.19 trillion from its core business operations up from N193 billion in the corresponding period of 2021.
The bank also reported N-520 billion from investing activities largely due to additions it made to its treasury bills during the period, and N69 billion from financing activities due to the cash inflow from long-term borrowings.
Read also: High operating expenses swing UACN to N4.7bn loss in 2022
Access Holdings Plc
Second on the list is Access Holdings with total cash and cash equivalent of N1.76 trillion in the nine-month period of 2022, 7.85 percent down from N1.91 trillion in the corresponding period of 2021.
Its total cash and cash equivalents comprise N786 billion in cash and bank balances with banks, N138 billion in money market placements, N563 billion in treasury bills with original maturity less than 90 days, and N238 billion in unrestricted balances with the central bank.
Furthermore, according to the movement in cash and cash equivalents, the tier-one bank generated N249 billion from its core business activities, down from N778 billion in the nine-month period of 2021.
It also reported cash used in investing activities of N-39 billion largely due to the net acquisition of investment securities during the period and N429 million from financing activities due to the proceeds from interest-bearing borrowings.
FBN Holdings Plc
FBN Holdings cash and cash equivalent for the nine-month period of 2022 amounted to N1.68 trillion, 34.40 percent higher than the N1.24 trillion reported in the nine-month period of 2021.
Its total cash and cash equivalents for the period comprise N3.7 billion in treasury bills included in financial assets at FVTPL, N350 billion in treasury bills, and eligible bills excluding pledged treasury bills, N1 trillion loans and advances to banks excluding long-term placements, N132 billion in cash, and N191 billion balance with central banks other than mandatory reserve deposits.
From the movement of its total cash and cash equivalents during the period, FBN generated N251 billion from its operations, up from N19 billion in the nine-month period of 2021, indicating that the firm grew cash generated from its core business activities enough to cover its short term obligations.
Net cash flow from investing activities for the period was negative, amounting to N67.9 billion in the nine-month period of 2022, largely due to the purchase of investment securities during the period.
Its net cash generated from financing activities grew on the back of proceeds received from borrowings, to N39 billion in the nine-month period of 2022 from N4.31 billion in the corresponding period of 2021.
Guaranty Trust Holding Company (GTCO)
Cash and cash equivalents reported by GTCO grew by 55.67 percent to N1.18 trillion in the nine-month period of 2022 from N758 billion in the corresponding period of 2021.
Their total cash and investment securities comprise cash in hand of N133 billion, money market placements of N494.5 billion, balances held with other banks totaling N416 billion, and unrestricted balances with central banks totaling N135 billion.
Furthermore, the firm generated interest income from its cash and cash equivalents amounting to N9.67 billion in the nine-month period of 2022, up from N3.86 billion in the same period of 2021.
It also generated N519 billion from its core business activities during the period under review, higher than the N282 billion it generated in the nine-month period of 2021. Its net cash from investing activities during the period, however, was negative (N-70.46 billion) due to the purchase of investment securities during the period, while the net cash flow from financing activities amounted to N-100 billion due to dividends paid to its owners and repayment of long term borrowings.
United Bank for Africa (UBA)
UBA’s cash and cash equivalents, despite being the lowest reported the highest growth by 109.71 percent to N950 billion in the nine-month period of 2022 from N453 billion in the corresponding period of 2021.
Included in its cash and cash equivalents are N1.21 trillion of restricted balances with the central bank, N582 billion of current balances with banks, N125 billion worth of money market placements, N86 billion worth of cash, and N252 billion worth of unrestricted balances with the central bank.
Total cash generated from its core business activities used to cater for short-term obligations declined by 13.2 percent to N482 billion in the nine-month period of 2022 from N555 billion in the same period of 2021.
However, it generated a sum of N29.5 billion from its investing activities during the period largely due to proceeds from the redemption of investment securities, while net cash flow from financing activities was negative (N-281 billion) during the period due to repayments of borrowings.
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