Top four lenders have impressed their shareholders and the investing public through their return on investment (ROI), dividend payout and 2023 financial performance.
The banks are: Guaranty Trust Holding Company (GTCO), United Bank for Africa (UBA), Zenith Bank Plc and Fidelity Bank Plc.
Guaranty Trust Holding Company (GTCO), in its Financial Year 2023 (FY23), recorded Earnings per Share (EPS) of N18.16. The board proposed a final dividend of N2.70 per share, bringing the total dividend for the period to N3.20 per share.
This implies a dividend yield of 8.9 percent based on last Thursday’s closing price, which impressed investors and shareholders.
In its audited financials, GTCO reported pre-tax profits (+184.5 percent) and net profits (220.5 percent) growth for the period. Similarly, pre-tax profits (296.4 percent) and net profits (220.5 percent) for Q4’s stand-alone performance also improved.
FY’23 earnings were driven largely by improvements in other income, propped majorly by unrealised gains from foreign exchange revaluation, which rose by 662.5 percent, occasioned by naira devaluation during the period.
Analysts from Coronation Research, in a note to clients, said despite the impressive performance, the market’s focus has been on the bank’s recapitalisation. Interest income grew by 69.3 percent year-on-year (y/y) primarily driven by a 232.5 percent y/y increase in earnings on investment securities.
The group’s investment securities portfolio grew 101.9 percent y/y, with much of the growth attributable to Treasury bills and bonds, allowing the firm an opportunity to take advantage of rising interest rates during the period. The average yield on investment securities rose by 448 basis points (bps) to 8.5 percent y/y.
Consequently, net interest income rose by 68.4 percent y/y with the net interest margin up by 132bps to 7.1 percent.
Non-performing loans declined by 100 bps to 4.2 percent, putting the group below the regulatory benchmark of 5.0 percent. Also, the firm’s capital adequacy ratio closed at 21.9 percent (vs 24.1 percent in FY’22), well above the minimum regulatory requirement of 15.0 percent.
The group’s earnings were above analysts’ expectations, especially reflected in the firm’s cost management style.
Analysts expect increased earnings growth for 2024, hinged on the improvement in yields both in the Treasury bill and bond markets, which are likely to support interest income.
On recapitalisation, the bank has announced intention to raise $750.0 million through share issues and bonds to shore up its capital base.
Another top lender, United Bank for Africa (UBA) reported impressive topline and bottom-line earnings in its FY’23 audited financial results. Pre-tax profits and net profits grew by 277.2 percent y/y and 261.6 percent y/y, respectively. Q4 performance was also strong, with pre-tax profits advancing by 309.7 percent y/y and net profits up by 191.8 percent y/y which investors are delighted about.
Accordingly, the Board proposed a final dividend of N2.30/share (total dividend: N2.80/s FY’23) on the full year 2023 EPS of N17.49. This implies a dividend yield of 12.3 percent on the closing price as of Thursday, April 25).
Improvements in earnings were supported by net interest income, driven by increases in earnings from investment securities and customer loans. Revenues from trading and foreign exchange income also supported earnings, hinged on fair value gains on derivatives and foreign exchange trading income.
Another aspect which investors are keen about is the non-performing loans ratio which rose to 5.9 percent performance (vs 3.0 percent in FY’22) above the regulatory limit of 5.0 performance, owing to a challenging macroeconomic environment.
For Zenith Bank, it reported pre-tax profits (179.6 percent y/y) and net profits (202.0 percent y/y) growth in its FY’23 audited results.
Q4 standalone performance followed the same trajectory, with pre-tax profits (254.4 percent y/y) and net profits (387.0 percent y/y) growing significantly.
Like GTCO and UBA, the Board announced a final dividend of N3.50/share (total dividend: N4.00/s FY’23) on the FY’23 EPS of N21.55. This implies a dividend yield of 11.0 percent based on Thursday, April 25 closing price.
The performance for the period was driven majorly by net-interest income and non-interest income, particularly trading revenues which increased substantially in Q4 23, beating our expectations. Bearish sentiment following the CBN’s publication of its circular requiring the recapitalisation of banks muted the market’s reaction to the results.
Interest income grew by 111.9 percent y/y, primarily driven by an 81.4 percent y/y increase in interest earned on customer loans.
Elsewhere, operating expenses grew by 32.3 percent y/y, mostly driven by the AMCON levy and information technology costs with the bank’s cost-to-income ratio settling at 27.2 percent (vs 45.4 percent in FY’22).
Asset quality remained generally strong with the non-performing loans ratio at 4.4 percent (FY’22: 4.3 percent), below the regulatory limit, despite the significantly challenging macroeconomic environment. The bank’s Capital Adequacy Ratio (CAR) closed at 21.7 percent (vs 19.8 percent in FY’22), higher than the regulatory requirement of 15.0 percent.
Analysts from Coronation Research expect the bank to continue to thrive from its retail and digital strategy, positively impacting interest and fees and commission income.
According to Blessing Ishola, a Research Executive at Coronation Research, the report is intended as background information for clients of Coronation Asset Management Ltd and clients of its subsidiaries and affiliates and is not to be read as a solicitation, approval or advice to buy or sell securities.
The reported noted: “Neither Coronation Asset Management Ltd, its directors, employees and contractors, nor its subsidiaries and affiliates, nor the directors, employees and contractors of its subsidiaries and affiliates, accept(s) responsibility for losses or opportunity costs, whether direct or consequential, that may be incurred as a result of trading, or not trading, in securities covered in this report, or other securities, as a result of any decision taken after reading this report.”
Its report noted that clients of Coronation Asset Management Ltd and its subsidiaries and affiliates, who read the report, should not rely on it for the purposes of making investment decisions and should make their own evaluation of the potential performance of securities, the risks involved in buying or selling securities, the volatility and liquidity of securities and of other factors such as interest rates, exchange rates, exchange rate liquidity, trading costs, settlement and custody.
Similarly, other analysts weighed in on the performance of another lender that is poised to join the league of tier 1 banks.
Fidelity Bank has been making waves in the Nigerian financial sector, with market analysts praising its performance. The Nigerian Exchange Limited (NGX) recently reclassified Fidelity Bank from a small-price stock to a medium-price stock, signalling its potential to achieve tier 1 status. In 2022, Fidelity Bank saw impressive financial results, with the highest gross earnings and profit before tax among similar banks.
The bank’s net interest margin and total assets also stood out, showcasing its strong financial position. While Fidelity Bank has faced challenges in managing operating costs, it has shown improvement in its cost-to-income ratio.
Analysts predict that the bank will reach full tier 1 status in the next banking sector report review based on its strong performance indicators. In 2023, Fidelity Bank continued to impress with a significant increase in total assets and a commendable market capitalisation.
The bank’s net income and return on equity also showed substantial growth, solidifying its position as one of the best-performing banks on the NGX.
Despite economic headwinds, Fidelity Bank remained resilient, posting impressive profits and loan growth.
The bank’s share price movement has been volatile but upward, reflecting investors’ confidence in its earnings growth and financial performance.
Stakeholders have expressed optimism about Fidelity Bank’s future, citing its strong performance and potential for growth.
Analysts and shareholders alike believe that the bank’s reclassification and financial results are positive signs for its continued success in the Nigerian financial sector.
ALSO READ: Breaking: Gov Obaseki approves N70,000 minimum wage
and then