Best performing banks in Nigeria judging by the numbers – Nairametrics
The year 2020 has been a remarkable year for the Nigerian banking sector as different policies such as GSI policy, loan restructuring etc. have been issued in favor of the sector. The industry has become more competitive during the year as each bank strives to increase its market size and revenues.
By following the public information of banks listed on the NSE, we analyzed them on the basis of popular metrics to determine the main players in the sector. For the analysis, the results for the year 2020 of the following banks were followed: Access, FBN, FCMB, Fidelity, GTB, Jaiz, Stanbic IBTC, Sterling, Union, UBA, Wema and Zenith Bank. Ecobank was not taken into account in the analysis because the bank operates efficiently in markets other than Nigeria.
The main metrics considered in these analyzes are total assets, net assets, total deposits, profit after tax, return on equity and return on total assets.
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Top banks by total assets
An analysis of the combined assets of the 12 listed banks that released their annual results (2020) (Ecobank excluded) showed that total assets increased by 27.9%, from 38.7 trillion naira to 49.4 billion trillion naira. The increase indicates the stronger financial position of the banks.
Among the 12 banks listed in the Nairametrics tracker, the following are the main banks.
First position – Access bank: 8,700 billion naira
Second position – Zenith Bank: 8.5 trillion naira
Third position – UBA: 7,700 billion naira
Fourth position – FBN Holdings: 7.7 trillion naira
Fifth position – GTB: 4,900 billion naira
Results – Access Bank and Zenith Bank maintained their position as banks with the highest total assets in 2020. UBA, however, overlooked FBN to come in third, while FBN fell to fourth on the list. Among the major banks (FUGAZ), UBA recorded the highest annual growth of 36.95% in 2020, while in the sector in general, Bank Jaiz recorded the highest growth in total assets of 39, 3%.
Net assets represent the remainder when all liabilities have been subtracted from the bank’s total assets. It indicates shareholders’ funds in banks. Due to the custodian nature of commercial banks and the ability of banks to significantly increase their liabilities, the metric is adopted by the CBN to assess the ability of the banking sector to resist credit losses.
The combined net assets of our 12 banks analyzed grew by 17.9% in 2020, with the strongest growth of 25.3% coming from Stanbic IBTC.
The main banks on the basis of net assets are:
First position – Zenith Bank: 1.1 trillion naira
Second position – Guaranty Trust Bank: 814.4 billion naira
Third position – FBN Holdings: 765.2 billion naira
Fourth position – Access bank: 751.0 billion naira
Fifth position – UBA: 724.1 billion naira
Results: We observe that all the banks have experienced significant increases in their net assets in 2020 while the former have also maintained their positions. However, Union Bank and Wema Bank recorded the weakest growth in net assets with an increase of 4.75% and 5.9% respectively. Zenith Bank’s net assets increased by 18.6%, Guaranty Trust Bank by 18.5%, FBNH by 15.7%, Access bank by 23.8% and UBA by 21.1%.
Customer deposits remain one of the most competitive positions in the banking sector since it is from deposits that loans are issued and other investments are made.
The total customer deposits of monitored banks grew by 32.1% in 2020. The bank with the highest growth in customer deposits during the period was UBA, with growth of 48.1%, rising from 3.8 trillion naira at the end of 2019 to 5.7 trillion naira as of April 31, 2021.
The main banks based on customer deposits are:
First position – UBA: 5.7 trillion naira
Second position – Access bank: 5.6 trillion naira
Third position – Zenith Bank: 5,300 billion naira
Fourth position – FBN Holdings: 4,900 billion naira
Fifth position – GTB: 3,500 billion naira
Results: UBA experienced significant growth in 2020, moving from fourth place in 2019 to the bank with the highest customer deposits at the end of 2020. Overall, all banks saw growth in customer deposits above 20% in 2020 with the exemption of Jaiz bank and sterling bank which increased by 7.2% and 6.5% respectively.
Profits after taxes
Due to the increased capacity seen in the growth of total bank assets, the banks under our radar provided improved PAT, with the exception of Fidelity and Wema Bank.
The banks that reported the most profits are;
First position – Zenith Bank: 230.6 billion naira
Second position – Guaranty Trust Bank: 201.4 billion naira
Third position – UBA: 113.7 billion naira
Fourth position – Access bank: 106 billion naira
Fifth position – IBTC Stanbic: 83.2 billion naira
Results: Zenith Bank and GTB outperformed their peers as in previous years. In addition, UBA again surpassed its 4th position in 2019, moving up the ladder to third position at the end of 2020. However, in terms of PAT growth, UBA also recorded the highest growth of 27, 7% during the period under review.
Return on equity
Return on equity is an important metric that shows the percentage of profit made on each L1 of the shareholders’ fund. It is used to measure the performance and efficiency of banks.
This metric will show to what extent banks have maximized the increase in shareholder wealth from which they benefited in 2020.
The main ROE-based banks are
First position – Trust bank guarantee: 26.8%
Second position – Stanbic IBTC Holdings: 24.4%
Third position – Zenith Bank: N22.4%
Fourth position – Jaiz Bank: N17.4%
Fifth position – UBA: 17.21%
Results- Following the increase in GTB’s total assets and PAT, the bank was able to achieve the highest efficiency in the sector by offering a rate of return of 26.8% to its shareholders.
Return on assets
This metric measures a bank’s ability to leverage its assets and generate the highest possible profits. In the previous section of the report, we indicated that banks saw a significant increase in their assets, however, the ROA was lower. ROA is a better measure of efficiency because it takes into account the bank’s use of customer deposits.
The best ROA-based banks are:
First position – Trust bank guarantee: 4.6%
Second position – Stanbic IBTC Holdings: 3.8%
Third position – Zenith Bank: 3.1%
Fourth position – UBA: 1.7%
Fifth position – Jaiz Bank: 1.5%
Results: A similar result is observed in the ROA as in the ROE. The sector’s average ROA was 2.05% and Access (1.3%), FBN (1.1%), FCMB (1.1%), Fidelity Bank (1.2%), Sterling bank (0, 9%), Union bank (1.2%) and Wema bank (0.6%) all performed below the industry average.