Jostling for more cash, banks grow liquidity by 28%

In a bid to have more liquid assets to pay off current liabilities, the biggest banks in Nigeria have collectively reported a 28 percent increase in total cash and cash equivalents reported in 2022.

The banks surveyed include Guaranty Trust Holding Company Plc (GTCO Plc), Zenith Bank, Ecobank Transnational Inc, Stanbic IBTC Holdings, United Bank for Africa, and First City Monument Bank. Other banks are yet to release their reports at the time of filling this report.

Findings showed the surveyed banks recorded a 27.62 percent growth in total cash and cash equivalents to N7.21 trillion in 2022 from N5.66 trillion in 2021.

Cash equivalents are investment securities that are meant for short-term investing; they have high credit quality and are highly liquid.

Analysts say companies with a healthy amount of cash and cash equivalents can reflect positively in their ability to meet their short-term debt obligations.

The movement of cash and cash equivalents that come in and go out of a company is summarised in the cash flow statements of these firms. The main components of these include operating activities, investing activities, and financing activities.

“A bank can have too much cash or cash equivalents on hand, though. It may be inefficient to sit on these resources instead of deploying them for company growth or rewarding investors with dividends,” Fummi Kuku, a financial analyst said.

Ngozi Odum, an analyst at CardinalStone Partners Limited said most banks are currently restructuring their assets towards yield-earning instruments.

“We expect more banks to increase liquid assets in 2023,” Odum said.

Oluwaseun Arambada, a research analyst, FBNQuest on Merchant Bank attributes the rising cash and cash equivalents to most banks maintaining their 2022 liquidity ratios above the regulatory minimum.

“Banks have generally maintained a liquidity ratio above regulatory minimum by maintaining a healthy balance of deposit mobilisation and risk asset creation in addition to new capital issuances,’’ Arambada said.

Bank Analysis

Zenith Bank

Zenith Bank reported the highest cash and cash equivalents amounting to N1.91 trillion at the end of the fiscal period of 2022, up by 71 percent from N1.134 trillion reported at the end of 2021.

It recorded N223.9 billion as profit after tax at the end of its fiscal year in 2022 from N244.56 billion recorded in 2021, an 8.4 percent decline.

Further breakdown of the cash and cash equivalent reveals the due from other banks accounted for the larger chunk of its cash and cash equivalents for the period.

The bank’s cash and cash equivalents comprise due from banks amounting to N1.26 trillion, cash and bank balances with the CBN (less mandatory reserves) totalled N452.1 billion and treasury bill (3-month tenor) totalled N232.2 billion for the year ended 2022.

The bank also recorded N1.176 trillion from its net cash flows generated from operating activities, largely from an increase in customer deposits to N 2.36 trillion.

It also recorded N-360.4 billion from its net cash flows from investing activities due to additions it made to its treasury bills during the year and also recorded N-97 billion from its net cash used in financing activities as a result of its repayment of long-term borrowings to N1.13 trillion recorded in 2022 from N0.712 trillion recorded in 2021.

There was a net increase in customer deposits to N2.4 trillion recorded at the end of 2022 from N1.1 trillion recorded in 2021.

Effect of exchange rate movement on cash balances increased to N87.9 million recorded in 2022 from N42.3 million recorded in 2021.

Ecobank Transnational Inc.

Second, on the list is Ecobank Transnational Inc., with total cash and cash equivalent of N1.66 trillion at the year of the financial period of 2022, a 7.75 percent drop from N1.69 trillion in the corresponding period of 2021.

It recorded a 141.3 percent increase in total deposits from customers to N1.4 trillion recorded at the end of 2022 from N0.58 trillion recorded in 2021.

It also reported cash used in investing activities of N-545.7 billion largely due to the net acquisition of investment securities during the period and N-56.6 billion from financing activities due to the repayment of borrowed funds.

While cash flow from operating activities recorded N508 billion in 2022 from N355 billion in 2021.

Profit after tax was N156.5 billion in 2022 from N146.3 billion recorded in 2021.

Guaranty Trust Holding Company Plc.

GTCO’s cash and cash equivalent recorded N 1.59 trillion at end of its financial year 2022, a, 74.7 percent increase from N0.91 trillion recorded in 2021.

Included in its cash and cash equivalents are; N107.9 billion of cash in hand, N465.1 billion of balances held with other banks, N469 billion of unrestricted balances with central banks, and N578.9 billion of money market placements.

Net cash flow used in investing activities increased to N229.2 billion recorded in 2022 from N223.8 billion in 2021 largely due to the purchase of intangible assets which recorded more than three- times fold increase to N16.1 billion in 2022 from N4.4 billion in 2021.

Net cash flow used in financing activities also increased from N121 billion in 2022 to N54.3 billion in 2021 as a result of the repayment of long-term borrowings.

United Bank for Africa (UBA)

UBA’s cash and cash equivalent recorded N 1.26 trillion at the end of its financial year 2022, a 60.5 percent increase from N0.785 trillion recorded in 2021.

Included in its cash and cash equivalents are; N780 billion of cash and current balances with banks, N351 billion of unrestricted balances with the central bank, and N129.5 billion of its money market placements (less than 90 days).

It recorded a profit after tax of N170.3 billion at the end of its financial year in 2022 from N118.7 billion in 2021, a 43.5 percent increase.

However, it generated a sum of N1.4 trillion from its net cash from operating activities largely due to the increase in deposits from customers, while net cash flows from financing activities was negative (N-31.4 million) during this period due to repayments of borrowings.

It recorded N1.44 trillion, a 110 percent increase in deposits from customers at the end of its fiscal year in 2022 from N 0.683 trillion recorded in 2021.

Stanbic IBTC Holdings

Cash and cash equivalents reported by Stanbic IBTC saw a decline of 21.9 percent to N611.27 billion at the end of its financial year 2022 from N783.4 billion recorded in 2021.

Included in its cash and cash equivalents are coins and bank notes amounting to N24.6 million, N479.8 million of balances with central bank, N20.5 million of current balances with banks within Nigeria and N139.4 million of current balances with banks outside Nigeria.

Treasury bills also amounted to N422 million in 2022, a decline of 23.4 percent from N551 million recorded in 2021.

Total customer deposits recorded in 2022 was N1.73 trillion from N1.56 trillion recorded in 2021.

Profit after tax also stood at N80.8 billion recorded at the end of its financial year 2022 from N56.9 billion recorded in 2021, a 42 percent increase.

However, it generated a sum of N171.2 billion from its cash flows used in operations, while net cash flows from financing activities was N10.2 billion and N98.8 billion recorded for its net cash flows used in investing activities during this period.

Effect of foreign exchange rate changes on cash and cash equivalents increased to N649 million recorded in 2022 from N4.39 million recorded in 2021.

First City Monument Bank

First City Monument Bank Ltd., one of the oldest banks in Nigeria recorded a decrease in its cash and cash equivalent at the end of its financial year to N247.5 billion in 2022 from N362.7 billion in 2021.

It recorded N52.86 billion as its net cash used in operating activities, and N188.57 billion was recorded as its net cash flow used in investing activities due to its increase in the purchase of property and equipment and acquisition of investment securities.

It recorded a decrease in its net cash generated from financing activities to N3.84 billion from N101.5 billion due to higher dividends paid to its owners to N3.9 trillion in 2022 from N2.9 trillion recorded in 2021.

Included in its cash and cash equivalents are cash amounting to N27.5 billion, N612.4 million of current balances with banks within Nigeria, N165.2 billion of current balances with banks outside Nigeria, N13.8 billion of placements with local banks, and N27.6 billion of placements with foreign banks.

Profit after tax recorded N 31.13 billion at the end of its fiscal period in 2022, from N20.9 billion in 2021, a 48.9 percent increase.

It also recorded N1.94 trillion as deposits from customers in 2022 from N1.55 trillion recorded in 2021.

Effect of exchange rate movement on cash and cash equivalents recorded an increase at the end of 2022 to N16.6 billion from N14.8 billion recorded in 2021.