Attaining 49.10 per cent Cost-to-Income Ratio (CIR) in 2023 financial year, FBN Holdings Plc ranks highest among Tier-1 banks in Nigeria amid increasing operational expenses.
The bank in the 2022 financial year declared 61.70 per cent CIR as against the 56.4 per cent reported in the 2021 financial year.
CIR is important for determining the profitability of a bank and it gives a clear view of how efficiently the bank is being run. -The lower the ratio, the more profitable the bank is.
The other Tier-1 banks reviewed by InsideBusinessNG are: United Bank for Africa Plc (UBA), Zenith Bank Plc, Access Holdings Plc, and Guaranty Trust Holding Company Plc (GTCO).
FBN Holdings in 2023 declared N564.3 billion operating expenses, about 51 per cent increase over N373.9 billion in 2022, while its operating income stood at N1.15 trillion, representing about 92 per cent increase from N600.3 billion in 2022.
The group in a statement attributed the hike in CIR to 51 per cent growth in operating expenses to N564.3 billion due to the rising inflationary environment, increase in regulatory fees reflective of overall business growth and controlled costs initiative that impacted positively on CIR, decreasing at a compound annual rate of -6.9 per cent over the last five years.
The group, however, reported N358.9 billion profit before tax in 2023, about 128 per cent increase from N157.7billiion reported in 2022.
In the period under review, GTCO with about Nbillion profit before tax declared 29.13 per cent CIR from 48.03 per cent in 2022. The reported 29.13 per cent CIR is the lowest in the banking sector.
GTCO had announced 26.5 per cent growth in Operating Expenses (OPEX), below headline inflation rate in Nigeria of 28.9 per cent and average inflation rate 40.3 per cent in its Ghana operations; the two Jurisdictions that accounted for 81per cent and 88 per cent of the Group’s Balance sheet and PBT respectively in 2023.
“The Group leveraged its FCY liquidity to fund all Customers’ foreign currency-denominated transactions thereby making a saving from interest expense it would have had to pay on FCY borrowings.
“Increase in Operating expenses resulted from growth in Regulatory costs- Deposit Insurance Premium and AMCON expenses and the impact of depreciation of functional currencies across all Jurisdictions wherein it operates.
In Nigeria, the twin impact of devaluation of the Naira and Fuel subsidy removal led to increased technology, repairs and maintenance cost and growth in the amount incurred on personnel cost and outsourced services.
“Overall, the Group was able to keep its Cost-to-Income Ratio (CIR) at 29.1per cent (44.5 per cent if net earnings are adjusted for impact of revaluation gains and exchange rate induced impairment charge), therefore coming slightly higher than the guidance of 40 per cent owing to significant increase in general price levels.
“The Group however remains committed to effectively managing costs despite inflationary and revenue pressures,” the bank explained in a presentation.
Zenith Bank came close to GTCO with 36.10 per cent CIR in 2023 from 54.40 per cent, while UBA declared 37.23 per cent CIR in 2023 from 59.04 per cent in 2022.
Amid reporting 36.10 per cent CIR, Zenith Bank leads other banks as the most profitable bank in Nigeria, followed by GTCO.
Zenith Bank reported N795.96 billion profit before tax in 2023, representing 180 per cent increase from N284.65 billion reported in 2022.
In addition, Access Holdings posted 44.60 per cent CIR in 2023 from 57.90 per cent reported in 2022, as the management stated that the downward was driven by higher revenues and positive outcomes from the various cost optimization initiatives.
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