With reduced income from fee and commission implemented at the start of the year by the Central Bank of Nigeria, and several other impairments, Nigerian banking sector has consistently been one of the most profitable sectors in the Nigerian Stock Exchange.
Banks have also seen their share price rally in recent weeks as investors finally recognize their low valuations amidst strong earnings. The Banking sector index is up 14.72 per cent year to date and only fell last week after investors embarked on cashing out their profits.
From the recently released third-quarter interim results by FBNH, UBA, GT Bank, Access Bank, Zenith Bank, Fidelity Bank, Stanbic IBTC, Sterling Bank, and Union Bank, in the first 9 months to date, the banks have reported a combined net interest income of N1.2 trillion compared to N1.1 trillion same period last year.
Some of the top banks in Nigeria posted a total net interest income of N403 billion in the third quarter of 2020 compared to N369.5 billion in the same period in 2019.
Deposit money banks have complained bitterly over the central bank’s frequent CRR debits chalking off significant amounts of cash that they could have earned on.
Despite the fact that they suffered CRR debits of over N1.9 trillion in the second quarter of 2020, taking the total amount of customer deposits held by the CBN at about N6.5 trillion, the banks still earned more this year compared to 2020.
Where banks may have suffered dips is in net interest margin, a measure of the percentage of income banks earn after netting off the cost of funds. However, this has also been largely mitigated by low deposit rates even as banks maintain most of their lending rates.
FBNH, Stanbic IBTC, and Access Bank all recorded lower net interest income in the first 9 months of 2020 compared to the same period in 2019. Significant gains over the prior year were however recorded with the other banks.
