Bank

Exclusive: Wema Bank emerges most profitable in PAT growth in Q1 2022

The Nigerian banking sector recorded impressive growth in the first quarter of the year, recording a 23.24% year-on-year increase in real GDP. This is also evidenced by the performance of the twelve commercial banks listed on the Nigerian Exchange (NGX).

Wema Bank proved its mettle in the key metrics of total assets growth, customer deposit growth, profit after tax growth, loan book growth, return on average equity and cost to income ratio.

According to a special report on the financial performance of quoted Nigerian banks by Nairametrics, some banks have dominated the efficiency, deposit, and profitability metrics, especially newly re-engineered banks like Wema Bank and Unity Bank, among others. They are now two of the top five leading banks in the country.

According to data from Nairalytics – the research arm of Nairametrics, the twelve banks reviewed posted an aggregate profit after tax of N275.27 billion in Q1 2022, representing a 14.7% increase compared to N239.95 billion posted in the corresponding period of 2021.

The banks were able to record an improved bottom line despite the CBN monetary policy leaning towards a dovish direction, that is, keeping interest rates low. However, the apex bank in its latest MPC meeting has raised the benchmark interest rate from 11.5% to 13%, and banks could be seeing a rise in their interest earnings going forward.

For this analysis, the Q1 2022 results of the following banks were tracked: Access Holdings, FBN Holdings, FCMB, Fidelity Bank, Wema Bank GT Holding, Stanbic IBTC, Sterling Bank, Union Bank, UBA, Unity Bank, and Zenith Bank. Ecobank was not considered in the analysis as the bank operates efficiently in other markets besides Nigeria.

The key metrics considered in these analyses are total asset growth, loan book growth, profit growth, cost–to–income ratio, and return on average equity.

Leading Banks by Profits After Tax (PAT) growth

The twelve banks under our radar posted an aggregate profit after tax of N275.27 billion in Q1 2022, which is 14.7% higher than the N239.95 billion recorded in the previous year (Q1 2021).

First position – Wema Bank (+119%)

Second position – First Bank (+108%)

Third position – Sterling Bank (+47.9%)

Fourth position – FCMB (+44.6%)

Fifth Position – FBNH: (+33.9%)

Upshots: In terms of net profit, Zenith Bank recorded the highest profit after tax of N58.19 billion. In terms of growth, Wema Bank topped the list with a 119% growth in its bottom line while First Bank recorded a 107.7% growth.

Leading Banks by cost-to-income ratio performance

The cost-to-income ratio is a key financial metric, which shows a company’s costs as a proportion of its income. It helps to give investors a clear view of how efficiently a bank is being run. Specifically, it shows how much input the bank requires to generate N1 of output.

Notably, the lower this ratio, the more profitable, productive, and competitive the bank will be. Here are the banks with the lowest cost-to-income ratio:

First position – First Bank (-12.48%)

Second position – FCMB (-6.83%)

Third position – Wema Bank (-5.5%)

Fourth position – Stanbic IBTC (-5.4%)

Fifth Position – Sterling Bank (-2.1%)

Upshots: First Bank recorded the highest decline in its cost-to-income ratio in Q1 2022, dropping from 79.5% recorded in Q1 2021 to 67.03% in the review period. FCMB also saw a decline in its numbers to 72.69%. However, GT Bank currently has the lowest cost-to-income ratio of 42.42% in Q1 2022.

Leading Banks by Total Assets growth

The analysis of the combined assets of the 13 listed banks (Ecobank excluded) reveals that the total assets increased by 6.7% from N57.67 trillion recorded as of December 2021 to N61.54 trillion in the review period. The total asset of the listed banks amounts to over 85% of Nigeria’s annual real GDP (2021 estimate).

The increase in the total assets of the banks indicates a stronger financial position. All the banks under study recorded an improvement in their total asset base. Below are the leading banks by total assets growth between March 2022 and December 2021.

First position – Fidelity Bank (+22.9%)

Second position – Zenith Bank (+18.9%)

Third position – Stanbic IBTC (+13%)

Fourth position – Unity Bank (+9.7%)

Fifth Position – Wema Bank (+7.7%)

Upshots: Fidelity Bank tops the list of best performers in terms of asset growth in the first quarter of 2022 after its total assets increased by 22.9% from N2.89 trillion recorded as of December 2021 to N3.56 trillion by the end of March 2022.

Leading Banks by Customer Deposits growth

Customer deposits remain one of the most competitive items in the banking sector since it is from deposits that loans are issued out and other investments are made.

The total customer deposits stood at N40.34 trillion, as of the first quarter of the year, representing an 8.7% increase compared to N37.1 trillion recorded as of the previous quarter. The bank leading the charge in terms of value is Access Bank, which accounts for 18.5% of the total share, however, Zenith Bank tops in terms of growth.

First position – Zenith Bank (+27.8%)

Second position – Fidelity Bank (+18%)

Third position – Unity Bank (+17.4%)

Fourth position – Wema Bank (+8.8%)

Fifth Position – Access Bank (+7.8%)

Upshots: Zenith Bank recorded the highest growth in customer deposits, followed by Fidelity and Unity Bank with 18% and 17.4% increases respectively. Only Union Bank recorded a customer deposit decline in the first quarter of 2022.

Leading Banks by loan book growth

Bank loan is an important metric used in assessing the performance of banks. Notably, loans allow for growth in the overall money supply in an economy and open up competition by lending to new businesses.

The interest and fees from the loans form a major part of where banks generate their earnings. According to the analysis, loans to customers increased by 8.3% to N21.71 trillion in Q1 2022 from N20.05 trillion recorded as of December 2021.

First position – Fidelity Bank (+28%)

Second position – Zenith Bank (+25%)

Third position – Unit Bank (+11.9%)

Fourth position – UBA (+7.1%)

Fifth Position – Stanbic IBTC (+6.4%)

Upshots: Fidelity Bank led the list of banks with the highest loan book growth in the first quarter of 2022. Specifically, its customer loan increased by 28% to N1.83 trillion from N1.43 trillion recorded as of December 2021.

Leading Banks by Return on Equity (ROAE)

The return on equity is an important metric that shows the percentage of profit made on every N1 of the shareholders’ fund. It is used to measure the performance and efficiency of the banks.

This metric will show how well banks have maximized any increase in shareholders’ wealth.

First position – Access Bank (21.39%)

Second position – UBA (20.4%)

Third position – GT Bank (19.3%)

Fourth position – Zenith Bank (19.2%)

Fifth Position – Wema Bank (15.96%)

Upshots: The aggregate returns on equity for the twelve banks stood at 13.72% as of March 2022. Access Bank led the list with a return on average equity of 21.39% (annualized) in March 2022, closely followed by UBA (20.4%) and GT Bank (19.3%).

Final Scorecard

Taking the average of the performance of the banks across the six metrics under our radar, we see Zenith Bank on top of the rank, followed by Wema Bank, Stanbic IBTC, First Bank, and Fidelity Bank based on their Q1 2022 numbers.