Out of 10 listed Nigerian banks, United Bank for Africa (UBA) Plc, Access Holdings Plc and FBN Holdings were the most liquid banks in the first quarter of 2024, BusinessDay analysis has revealed.
The cumulative cash and cash equivalents of UBA, Access Holdings Plc, FBN Holdings, Guaranty Trust Holding Company, Zenith Bank, Stanbic IBTC Holdings Plc, FCMB Group Plc, Fidelity Bank, Sterling Holdco, and Wema Bank rose to N20.7 trillion in Q1 2024, a 117.6 percent increase from N9.51 trillion in the same period of 2023.
Ngozi Odum, banking analyst at CardinalStone Partners Limited, said that an increase in cash and cash equivalents means better liquidity for banks.
“However, it depends on where the cash is, if the cash and cash equivalents are earning interest or sitting idly in their accounts,” Odum said. “If they have more money market instruments, they will earn interest on it, otherwise, the cash sits idly in their accounts.”
“The banking sector is a cash-based business and cash most times is not an issue,” Oluwaseun Arambada, a research analyst at FBNQuest, said, adding that a bank’s liquidity level is an appropriate metric to consider.
He said most tier-1 and tier-2 banks have a liquidity position above the 30 percent regulatory threshold.
“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,” Arambada added.
Cash availability allows a business the option to expand, build and launch new products, buy back shares to affirm their strong financial position, pay out dividends to reward and bolster shareholder confidence, or reduce debt to save on interest payments.
Hence, if a company is experiencing a positive cash flow, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, pay for expenses, reinvest in the business, endure recession and finally pay dividends to shareholders.
Analysis of individual banks
United Bank for Africa (UBA)
United Bank for Africa leads the pack with the largest amount of cash and cash equivalent generated in the first quarter of 2024,
This rose to N4.87 trillion, up 330 percent from N1.13 trillion in the same period of 2023.
As of March 2024, the net cash flow from operations was N2.49 trillion. Its net cash used in investing activities amounted to a negative N1.08 trillion, and the net cash used in financing activities was a negative N129 billion.
The bank’s after-tax profit grew by 166 percent to N142.6 billion in the first quarter of 2024 from N53.6 billion.
Access Holdings
Access Holdings followed closely as the second bank with the most cash and cash equivalent amounting to N3.9 trillion in the first three-month period ended March 2024, a 235 percent increase from N1.17 trillion in Q1 2023.
The holding company’s net cash flow from operations amounted to N28 billion as of March 2024, net cash used in investing activities rose to N401 billion and reported negative net cash (used in)/generated from financing activities of N561 million during the period.
The holding company recorded an after-tax profit increase of 121.80 percent to N159.3 billion from N71.8 billion.
FBN Holdings
FBN Holdings’ cash and cash equivalents amounted to N3.45 trillion in Q1 2024, a 180.4 percent increase from N1.23 trillion in the same period of 2023.
The holding company saw its net cash flow from operating activities at N2.18 trillion. Its net cash flow from financing and investing activities stood at a negative N1.1 trillion and N184 billion during the period.
The group’s after-tax profit rose by 315.3 percent to N208.1 billion from N50.1 billion in Q1 last year
Guaranty Trust Holding Company Plc (GTCO)
GTCO’s cash and cash equivalents stood at N2.99 trillion in the first three months, a 118.2 percent increase from N1.37 trillion in Q1 2023.
The holding company saw its net cash flow from operating activities at N366 billion. Its net cash flow from financing activities stood at a negative N492 billion while its net cash from financing activities rose to N158 billion during the period.
The holding company recorded an after-tax profit increase of 685.4 percent to N457.1 billion from N58.2 billion.
Zenith Bank
Zenith Bank’s cash and cash equivalents fell to N2.2 trillion in the first three months of the year, a 1 percent drop from N2.31 trillion in Q1 2023.
As of March 2024, the bank’s net cash flow from operations was N22 billion. Its net cash used in investing activities amounted to a negative N992 billion, and the net cash used in financing activities was a positive N38 billion.
The bank’s after-tax profit rose to N258.3 billion from N66 billion.
Stanbic IBTC Holdings Plc
Stanbic IBTC’s cash and cash equivalents amounted to N1.4 trillion in Q1 2023, a 133 percent increase from N617 billion in the same period of 2023.
The holding company saw its net cash flow from operating activities at N791 billion. Its net cash flow from financing activities stood at N50 billion while its net cash from financing activities rose to N140.8 billion during the reviewed period.
The statement disclosed that the holding company’s after-tax profit rose to N115.8 billion in Q1’24 from N50.4 billion.
FCMB Group
FCMB Group recorded N704 billion in cash and cash equivalents in Q1 2024, a 144 percent increase from N288 billion a year earlier.
The group saw its net cash flow from operating activities at N112 billion. Its net cash flow from financing activities stood at N429 billion while its net cash from financing activities stood at a negative N12 billion during the reviewed period.
Its after-tax profit rose to 209.70 percent to N28.8 billion in Q1’24 from N9.3 billion in Q1’23.
Fidelity Bank
Fidelity Bank’s cash and cash equivalents stood at N481 billion in the first three months of the year, up 44 percent from N335 billion in Q1 2023.
The bank saw its net cash flow from operating activities at a negative N215 billion. Its net cash flow from financing activities stood at N354 billion while its net cash from financing activities stood at a negative N26 billion during the reviewed period.
The bank’s after-tax profit increased to N31.4 billion, up 101.30 percent from N15.6 billion.
Sterling Financial Holdings Company
Sterling Holdings cash and cash equivalents stood at N357 billion in the first quarter of the year, up 82 percent from N195 billion in Q1 2023.
The holding company saw its net cash flow from operating activities at N126 billion. Its net cash flow from financing activities stood at a negative N215 billion while its net cash from financing activities stood at a negative N40 billion during the reviewed period.
The group’s after-tax profit rose by 82.9 percent to N7.5 billion in Q1’2024 from N4.1 billion in the first quarter of 2023.
Wema Bank
Wema Bank’s cash and cash equivalents dipped 4 percent to N342 billion in Q1 2024 from N95.34 billion in the same period of 2023.
The bank saw its net cash flow from operating activities at a negative N33 billion. Its net cash flow from financing activities stood at N143 billion while its net cash from financing activities stood at N12 billion during the reviewed period.
The bank’s after-tax profit increased to N9.4 billion, up 74.1 percent from N5.4 billion.
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