The Nigerian banking industry may have had its share of the ongoing uncertainty about the economic impact of the COVID-19 crisis which delivered renewed pressure on the operators, leaving the big five banks with a paltry 2.4 per cent growth in profit before tax in nine months of 2020.
The Deposit Money Banks (DMBs), prior to the pandemic had battled declining saving culture, bad loans, insiders’ abuse and frauds which altogether, combined to impact their performance.
Zenith Bank, GTB, Access Bank, UBA, and First Bank are in the topmost category and their third-quarter results as gleaned from the regulatory filing to the Nigerian Stock Exchange (NSE) is an evidence of the drop in business activities brought about by a declining economy that is worsened by the Covid-19 pandemic.
Nigerian Minister for Finance, Budget and Planning, Zainab Ahmed on 21st May gave an indication of what is currently manifesting in her report to the National Economic Committee (NEC). She stated that the country had an oil revenue shortfall of N425.52 billion in the first quarter of the year shiwing that Nigeria got only N940.9 billion from her expectation of N1.3 trillion oil revenue between January and March thisn year.
“This period, perhaps is the most challenging in the country’, she said as the economy, across all the sectors, battle the impact of the pandemic. The federal government remains the biggest spender in the country and whatever happens to its revenue with impact on the industry.
Equally, the IMF had prepared Nigerians for the challenging times when it downgraded the growth projection from 2.5 per cent earlier projected to 2 per cent based on the relatively oil prices and limited fiscal space in February on conclusion of its Airticle IV consultation with Nigeria.
Besides the drop in business activities, findings show that the financial institutions’ state was worsened by the huge provisions for bad loans and high incidences of defaults brought about by the COVID-19 lockdown that led to a big drop in the global economy.
The Nigerian banking sector is not alone in this precarious state as data from BuyShares.co.uk shows that the market capitalization of the global top 100 banks slumped by €300 billion in the third quarter of the year, falling from €4.1 trillion in June to €3.8 trillion in September 2020.
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In the first quarter of 2019, the market cap of all banks worldwide amounted to €7.1trn, revealed Statista and BankingHub data. By the end of the year, this figure jumped by 7 per cent to €7.6trn.
However, the COVID-19 pandemic delivered a huge hit to the global banking industry, causing its market cap to drop by 30 per cent YoY to €4.9trn in March, the lowest quarterly value since the 2008 financial crisis. The following months witnessed recovery with the market cap of all banks worldwide rising to €5.3trn by the end of June. Nevertheless, this figure dropped to €5.2trn in September, a 27.5% plunge year-over-year.
The BankingHub data showed the market cap of the top 100 banks amounted to €5.6trn in December 2019. After the stock market crash in March, it slumped by 30 per cent to €3.9trn. Although the world’s largest financial institutions were able to make up their losses between April and June, their recovery stopped in the third quarter of the year and hit a new low point of €3.8trn, a 28 per cent plunge YoY.
The BankingHub data also revealed that the global top 100 banks showed the lowest total shareholder return (TSR) performance across all industry sectors in Q3 2020, falling by 1.7 per cent quarter-over-quarter. In comparison, the technology sector rose by 13.4 per cent in the same period.
In Nigeria however, InsideBusiness gathered that the five DMBs reported a total of N614.945 billion PBT in nine months ended September 30, 2020, from N600.338 billion reported in nine months ended September 30, 2019. The increase is a paltry 2.43 per cent.
Also, our correspondent gathered that DMBs leveraged on fees and commission on electronic transaction and non-core banking transactions to boost PBT in the period under review.
Zenith bank with about 0.6 per cent increase in PBT to N177.283 billion in nine months of 2020 as against N176.183 billion reported in nine months of 2019.
Zenith bank, according to our correspondent’s findings, is leading the sector in terms of profitability.
According to the Zenith bank, the growth in profit demonstrates the bank’s resilience against the backdrop of a challenging macro-economic environment brought about by COVID-19.
“Going into the final quarter of the year, we will remain resilient as we keep adapting to the headwinds in the operating environment and continue to deliver enhanced customers experience and stakeholders value,” the bank management said in a statement.
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However, Guaranty Trust Bank Plc (GTBank) reported N167.35 billion PBT in nine months of 2020, 1.9 per cent decline from N170.65billion reported in nine months of 2019, while Access Bank grew PBT by 16 per cent to N116.6billion in nine months of 2020 from N100.8billion reported in nine months of 2019.
The Managing Director/CEO of GTBank, Segun Agbaje in a statement, said“Our 3rd Quarter result is a reflection of how we have appropriately positioned our balance sheet to cope with current economic realities and the challenging business environment.
“It is also testament to the enduring loyalty of our customers, the hard work and dedication of our staff and the unwavering support we continue to enjoy from all our stakeholders in our drive to deliver best-in-class financial services and superior and sustainable returns.”
Reacting also, the CEO, Access bank, Herbert Wigwe in a statement said, “We have continued to grow our African footprint in a capital-efficient and profitable manner, in furtherance of our vision to be the World’s most respected African Bank and Africa’s payment gateway. Our African expansion strategy is two-pronged; consolidating in markets we already exist (Mozambique and Zambia) to become major players, and entering into new key African markets and trade corridors (Guinea, Kenya and South Africa).
“In addition, we have received the Central Bank of Nigeria’s Approval-In-Principle for a holding company (“HoldCo”) structure which will enable us further accelerate our objectives around business diversification, improved operational efficiencies, talent retention as well as robust governance.
“The year has been challenging for all and I would like to appreciate our customers for their unwavering loyalty in these uncertain times. Recognizing the adverse effects of the recent events on our customers, we remain committed to delivering superior value to our customers and providing innovative solutions for the markets and communities we serve.
“Going into the last quarter of the year, our focus remains on consolidating our retail momentum and expanding our African footprint.The next two years will see updates with regards the realization of synergies and actualization of the Bank’s strategic intent. Finally, I would like to thank our people and shareholders as we could not have achieved these feats without their dedication, commitment and support.”
In addition, United Bank for Africa Plc reported eight per cent decline in PBT to N90.37billion in nine months of 2020 from N98.23billion reported in nine months of 2019.
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FBN Holdings reported significant increase in PBT by 16 per cent to N63.31illion in nine months of 2020 over sustainable gain in net gains on sale investment securities.The PBT was N54.5 billion in the nine months of 2019.
The Group Managing Director of FBN Holdings, U.K Eke had said, “Looking ahead, we remain cautious, but we are confident that our business is fundamentally strong to withstand any future challenge towards enhanced performance”.
Statistics show that Europe is the hardest hit as banks in the zone witnessed 11.7 per cent decline quarter on quarter and this has led to the extension of the ban on dividend for eurozone banks. While the banks in the US were able to keep Total Shareholders’ Return (TSR) almost constant in the third quarter of 2020, data have shown that Banco Santander, Societe Generale, Banco Bilbao Vizcaya Argentaria, and HSBC are the hardest hit, with their TSR falling by 26.4 per cent, 23.5 per cent, 22.6 per cent, and 20.4 per cent, respectively.
The Yahoo Finance data also showed that Banco Santander witnessed the largest YTD market cap decrease among the largest European banks, falling by 38 per cent to $38.5 billion. UK’s HSBC lost nearly $60 billion in market cap since the beginning of the year, the second-largest drop in Europe.
Although the leading US banks performed well in the third quarter, their market cap still remained below 2019 figures.
As the leading bank globally, JP Morgan Chase witnessed a 19 per cent YTD drop, with the combined value of its shares falling from $429.9 billion in December 2019 to $345.6 billion last week. The market capitalization of the Bank of America, the second-largest financial institution in the United States, rose to $233.6 billion last week, still 25 per cent below the December figures.
Statistics show Wells Fargo witnessed the most significant market cap plunge among the top three US banks, with the figure falling by 55 per cent YTD to $99.5 billion.
Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China witnessed 13 per cent, 10 per cent, and 8 per cent YTD market cap drop, respectively.