The top six Nigerian banks recorded 32 per cent growth in their interest earnings assets in ten years from 2010 to 2020. The banks are Access Bank, FBN Holdings, Guaranty Trust Bank (GTBank), Stanbic IBTC, United Bank For Africa (UBA) and Zenith Bank.
Coronation Asset Management disclosed this in its report on Nigerian banks titled, “Nigerian Banks, Resilience Built In”.
Among other things the report shows that Nigerian banks’ earnings have been remarkably resilient over the interest rate cycle, while their profitability is improving over time and their stock values are remarkably cheap compared to Ghanaian and Kenyan bank stocks.
The report stated: “The total Average Interest Earning Assets of the six banks in our study rose from N6.5 trillion in 2010 to N26.9 trillion in 2020, or by 311 per cent. The total Gross Loans of these banks rose from N3.9 trillion in 2010 to N13.6 trillion in 2020, or by 248 per cent.
The positive outliers for growth are Access Bank (growing quickly even before its 2019 merger with Diamond Bank), UBA and Zenith Bank. “Looking at the inflation-adjusted total Average Interest Earning Assets over 10 years for the banks under study, these grew by just 32 per cent over the 10 years to 2020, or by a compound annual growth rate (CAGR) of 2.82 per cent.”
Commenting on the outcome of the study, Guy Czatoryski, Senior Research Analyst at Coronation Research, said: “While underlying growth in assets has been elusive, especially when data are adjusted for inflation, profitability has generally improved.
The return on average equity (RoAE) and return on average assets (RoAA) of the six banks studied have both converged and improved over 10 years. This trend appears to be under-appreciated by investors, and the report shows the positive investment potential in the sector.”
– Vanguard