Nigerian Banks Earn Massive as Loan Book Jumps by N8.5trn in Nine Months

This is according to data compiled by Nairalytics from the unaudited financial statements of the banks. Specifically, the ten commercial banks that have released their Q3 financials as of press time, saw their loans to customers increase from N22.66 trillion recorded as of December 2022 to N31.1 trillion by the end of September 2023. 

This translates to a 37.3% increase in the review period. Customer deposits also surged by N18.6 trillion in the same period to N61.99 trillion in contrast to N43.37 trillion recorded as of December 2023. 

In the same vein, interest income witnessed a significant boost to the tune of N4.18 trillion, a 65.9% increase from N2.48 trillion recorded in the corresponding period of 2022.

Net profit also surged by 153% year-on-year to N1.93 trillion in the 9-month period of 2023 from N762.6 billion recorded in the previous year.  

It is however worth noting that a significant portion of the net income will not be paid as dividends to shareholders, following the CBN directive to banks not to pay dividends from FX revaluation gains. 

Why the robust performance 

The significant increase in the banks’ balance sheet is largely attributed to the impact of the devaluation of the official exchange rate.

Recall that the CBN announced the floating of the naira at the official Investors and Exporters window (IEFX), which saw the official rate depreciate from an average of N465/$ to around N750/$. 

The floating of the exchange rate implies that the balance sheets of banks will remain responsive to the dynamics of the exchange rate market due to their foreign assets and liabilities, which include deposits, debts, and loans extended to customers. 

Notably, the naira depreciated by 39% between January and September 2023 and has continued to trend downwards, trading as high as N1,100/$ in recent weeks. This implies that banks could see a further surge in their balance sheet before the end of the year. 

In addition to the impact of FX revaluation on loans and interest income, banks have also enjoyed increased revenue as a result of the high-interest rate environment. The apex bank has maintained a tight monetary policy since 2022 in a bid to rein on inflation, which has remained sticky high all through the year. 

The CBN’s benchmark interest rate increased from 16.5% in December last year to a record high of 18.75% in September 2023, while the prime lending rate stood at 14.32% from 13.85% in the reference period. 

Banks with the highest customer loan growth 

UBA recorded the highest growth rate in terms of loans to customers, growing its loan book by 57% to N3.14 trillion, while Zenith Bank led the list in terms of nominal growth, with an increase of N1.9 trillion to stand at N5.78 trillion as of September 2023. 

Meanwhile, Access Bank maintained the top spot as the bank with the highest loans to customers, which was N6.7 trillion as of the review period, representing a 31% increase from N5.1 trillion recorded as of December 2023. 

It is worth adding that all the banks saw their loans to customers increase in the period under review except for Unity Bank, which declined by 23% to stand at N222.79 billion from N289.36 billion as of the beginning of the year. 

Banks with the highest interest income 

Access Bank recorded the highest interest income among the listed banks, posting a total interest income of N1.04 trillion. Zenith Bank and UBA followed in second and third spots with income of N670.9 billion and N666.3 billion respectively. 

GTCo recorded an interest income of N374.6 billion, while Fidelity Bank earned N324.8 billion. On the flip side, Unity Bank recorded the least with N33 billion.