Three of Nigeria’s five biggest banks, as measured by the African Business’ Top Banks survey, have announced impressive financial results for 2016.
United Bank for Africa (UBA), Access Bank and Zenith Bank have all registered big increases in revenues and profits, while the national economy continues to struggle.
UBA’s financial report, released on March 27, revealed a 22% increase in gross earnings from N315 billion (US$991 million) in 2015 to N384 billion (US$1,2 billion) last year. The bank’s pre-tax profits jumped 32% to N91 billion (US$286 million).
The bank has successfully expanded outside of its domestic market, with operations in 19 African countries, plus the UK, US and France, all contributing to the positive financial results. UBA has 11 million customers worldwide.
A spokesperson said: “UBA’s subsidiaries outside Nigeria are increasingly gaining market share, reinforcing the strong and impressive subsidiary contribution to the group, estimated at one-third of profit in 2016, from a quarter in 2015 financial year.”
The contribution of UBA’s non-Nigerian operations have contributed to the 20% rise in the company’s share price in the twelve weeks between January 1 and the announcement of its financial results. Nigerian banks are now beginning to join those from South Africa, Kenya, Morocco, the UK and France in establishing operations in many different African markets. None as yet, however, can genuinely claim to be pan-African banks.
Nigeria’s financial authorities are keen to encourage more initial public offerings (IPOs) in order to strengthen the markets and generate more financing for private companies.
In particular, the Securities and Exchange Commission wants to reduce the charges for new listings. However, it will probably take a recovery in oil prices to stabilise the economy and inject more liquidity into the system.
Meanwhile, Lagos-headquartered Access Bank has announced total revenue for 2016 of N381 billion (US$1,20 billion), with a pre-tax profit of N90 billion (US$283 million), representing increases of 13% and 20% respectively. Group managing director Herbert Wigwe said: “We remain cautiously optimistic about the macroeconomic environment in 2017.
“Nonetheless, our objective of delivering sustainable shareholder value remains unchanged. We will also continue to maintain our proactive and disciplined risk management practices and leadership in sustainability initiatives.”
For its part, Zenith recorded a 23% rise in post-tax profits, from N105bn (US$330 million) in 2015 to N130 billion (US$409 million) for 2016. Its gross total assets increased from N4 trillion (US$12,5 billion) to N4,739 trillion (US$14,9 billion) over the same period. It has announced a dividend of 202 kobo a share for the year.
However, Zenith has halted plans for bond and equity issues because of Nigeria’s economic difficulties.
The sales, which it had been hoped would raise up to N100billion (US$12,4billion), had been announced in February, but the bank did not believe that the health of the capital markets had improved sufficiently to proceed.
A Zenith spokesperson said “The request for shareholders’ approval to raise fresh capital has been withdrawn”, after its annual general meeting in Lagos.
The chairman of the Progressive Shareholders Association of Nigeria, Boniface Okezie, said: “I think the decision of the bank should be respected. It is better that it did not go ahead with the offer than to lose out at the end. A bank like Zenith Bank cannot afford to fail at this time because they are the leader in the sector as of today.”
While the Nigerian Stock Exchange (NSE) lost 6,2% in Naira terms and 40% when measured in US dollars last year, Zenith shares gained 5% last year. However, all of these gains have already been wiped out, as Zenith’s value has fallen in the line with the performance of the wider NSE. These fluctuations seem to have more to do with the trials and tribulations of the Nigerian economy than the bank’s performance.
The Nigerian economy contracted in the final quarter of 2016, giving a 1,5% fall in GDP for the entire year. It is difficult to judge President Muhammadu Buhari and the new government for the recession, which is the first in Nigeria for a quarter of a century. The crisis is primarily the result of low oil prices, low oil production and a lack of foreign currency.
Zenith chairman Jim Ovia said: “As a bank, we are monitoring developments both in the local and global economy and applying pragmatism and dynamism as appropriate. Our strategy and approach to the pursuit of financial inclusion and sustainability gives us a lot of competitive advantage to explore even new frontiers in the market.”