Banks Earn N1.36trn Income From Investment Securities on Higher Rates

There has been a surge in investment securities such as government bonds or treasury bonds (T-bills) in the books of lenders, thanks to the aggressive hike in interest rate by the central bank that seeks to stabilise the economy.

According to data from Intelligence, the largest banks realised N1.36 trillion in government bonds and treasury bills (T-bills) as at September 2023, which represents a 121.66 percent surge from 2022’s N614.94 billion.

The uptick in investment securities also has added strength to earnings in what is becoming a good year for shareholders who expect bumper dividends.

It is not surprising that financial institutions with enough liquidity to invest in these securities to earn a higher return are beneficiary of monetary policies.

This is because whenever the regulator embarks on a tightening campaign to rein in sticky inflation, lenders see an uptick in investments and interest on loans and advances to customers that lifts net interest income.

The Monetary Policy Committee (MPC) of the Central Bank had increased its benchmark monetary policy rate (MPR) for the third time this year by 50 basis points to 18.5 percent.

Nigeria’s inflation increased to 26.72 percent, representing a 0.92 percent-point rise from the previous month’s 25.80 percent.

The Nigeria 10 year government bond has a 15.429 percent yield, according to data from World Government Bonds.

Zenith Bank made N216.75 billion from investment securities in September 2023, which represents a 76.15 percent increase from 2022’s N122.96 billion.

Access Bank Plc income from government bonds and T-bills stood surged by 246.30 percent to N436.75 billion as at September 2023, from N126.11 billion the previous year.

United Bank for Africa (UBA) Plc income for investment securities spiked by 79.90 percent to N297.24 billion in September 2023 from N165.25 billion the previous year.

Guaranty Trust Holding Company (GTCO) Plc income from investment securities spiked by 165.30 percent to N91.40 billion in the period under review from N56.95 billion the previous year.

FBN Holdings Plc realized N186.71 billion in income from investment securities, a 132.11 percent surge from last year’s N106.26 billion.