Nigeria’s five tier-one banks followed different strategic tracks and competitive tactics to deliver a combined after-tax profit of N4.1 trillion to their shareholders in 2024.
Some banks, however, grew the shareholders’ wealth well ahead of others, as the ability to extract revenue from assets and profit from revenue differed widely among the players.
The banks, First Holdco Plc, United Bank of Africa Plc, Guaranty Trust Bank Plc, Access Holdings Plc and Zenith Bank Plc (the FUGAZ Group), experienced phenomenal growth in earnings and assets for the second year in 2024, raising combined after-tax profit from under N2.8 trillion in 2023 to N4.1 trillion in 2024.
The profit is extracted from the combined gross earnings of N17.4 trillion in the year, a growth of 81.4 per cent from the N9.6 trillion figure the banks generated in the previous year from combined total assets of over N143 trillion, an increase from N94.34 trillion in the preceding financial year.
Nigerian banking has since broken free from the traditional model where small banks drive growth and big names hold the volume. Here, the giants are in charge of business volume and development, a model that has seen the rise of Nigerian multinational banking institutions across Africa and beyond.
Different operational structures and varied strengths and weaknesses prevailed in the marketplace, which explains the degrees of the banks’ performance. Leaders by assets and revenue lost the race in profit delivery and returns to shareholders.
The reason is the wide-ranging profit margins seen among the banks, which often raises the question whether it isn’t the same industry they operate in. Even for the five tier-one banks, profit margins in 2024 ranged from 12.7 per cent to 46.8 per cent.
How each bank balances its costs and incomes is the inside game that produces the external results. Cost of funds posed a major factor in the cost-income structure of banks in 2024, and how some banks were able to save huge costs from interest expenses while others paid so much to earn a naira of interest income is clouded in their competitive tactics.
If the leading banks by asset volume and revenue had the leading profit margins, their profits would have been up to three and a half times the actual numbers. Also, if the profit leaders had the asset and revenue numbers of the giants, their profit would have been more than double the actual figures for the year.
Access Holdings
Access Holdings Plc maintained the leadership of the banking industry by the size of the balance sheet and revenue volume in 2024. It is also one of the top assets’ growers among the tier-one banks in the year, with an increase of 55.5 per cent in total assets to close the year at N41.50 trillion.
The bank stepped up its ability to convert assets into revenue in the year, and gross earnings rose by 88 per cent to N4.88 trillion – the biggest revenue figure in the Nigerian banking space in 2024. However, it ranks the least among the five tier-one banks when it comes to converting revenue into profit.
An increase of 3.7 per cent in after-tax profit to N642.2 billion in 2024 contrasts widely with the 88 per cent expansion in revenue. Rising costs are to blame for the inability to convert the gains in revenue into profit, of which interest expenses are the main hindrance. At N2.21 trillion, the cost of funds consumed as much as 63.6 per cent of interest income, rising from 58 per cent in the previous year.
There was strength in growing interest earnings from its loans and advances, and investment portfolios of N13 trillion and over N11 trillion, respectively. Interest earnings grew by 110.4 per cent to N3.48 trillion, but a much faster growth of 130.7 per cent in interest expenses claimed a good part of the increase.
Eroding profit capacity is also due to operating expenses that grew by 108.5 per cent to N1.45 trillion, the most rapid expansion in operating costs among the tier-one banks in the year. Income tax equally eroded profit capacity in the year, at an increase of 105 per cent to N224.8 billion.
The incursion from tax expense lowered the margins of increase from 18.9 per cent in pre-tax profit to 3.7 per cent in after-tax profit, to the closing figures of N867 billion and N642.2 billion, respectively. Access Holdings lost its net profit margin – the ability to convert revenue into profit from 23.6 per cent in 2023 to 12.7 per cent in 2024.
UBA
United Bank for Africa closed the 2024 operations with total assets of N30.32 trillion, the second-largest banking balance sheet in the Nigerian banking space. This represents an increase of 46.8 per cent, which produced a stronger growth of 53.6 per cent in gross earnings to N3.19 trillion for the year.
The bank’s revenue growth was accounted for by an increase of 120.4 per cent in interest earnings, while non-interest revenue dropped by 34 per cent to about N583 billion. The strength to grow profit weakened in the year, as after-tax profit rose by 26 per cent to N766.6 billion, less than one and a half times the increase of 53.6 per cent in revenue.
The cost of funds and the operating expenses hindered profit improvement, claiming increased proportions of gross earnings in the year. At over N839 billion, interest expenses grew ahead of interest income at 128 per cent compared to 120.4 per cent but remained comparatively low at its claim of 35.4 per cent of interest earnings.
Operating costs, the second major revenue consumer for UBA in 2024, advanced by 69.2 per cent to N1.06 trillion, beating the 53.6 per cent revenue growth. The incursion raised the operating costs margin of the bank from 30 per cent to 33 per cent over the review period. Conversely, net profit margin went down from 28.8 per cent in 2023 to 23.3 per cent in 2024.
Zenith Bank
For the second year, Zenith Bank ran neck to neck with UBA on asset base and closed the 2024 operations with total assets of almost N30 trillion, an increase of 47 per cent for the year. Zenith Bank demonstrates a clear superiority in converting assets into revenue and profit.
The bank grew its gross earnings by an impressive 86.3 per cent margin to stand at N3.97 trillion, from a 47 per cent growth in assets. It shows the highest asset turnover in seven years and one of the top two best asset yield records among the tier-one banks in the year.
Zenith Bank’s revenue growth was led by interest income from its large portfolios of N14.91 trillion loans and advances and investment securities in excess of N5 trillion, respectively. Interest income surged upward by 137.7 per cent in 2024 to N2.72 trillion, but non-interest earnings slowed down at an increase of 19.7 per cent to N1.10 trillion.
The costs of funds grew moderately ahead of interest earnings at 143 per cent to N992.5 billion compared to the 137.7 per cent growth in interest income. However, the impact was partly remedied by a sharp slowdown in net loan impairment expenses, which grew by 60.8 per cent to N658.8 billion against an increase of 232.3 per cent to N409.6 billion in the preceding financial year.
The bank prevented operating expenses from being incurred as revenue during the year, with operating costs growing only slightly ahead of revenue at 87.6 per cent to N843.4 billion. That favourable combination gave the bank the least operating cost margin of 21.2 per cent among the tier-one players in the banking industry in 2024.
The incursion by cost of funds worked down to profit, resulting in a slower growth of the bottom line than revenue. At N1.33 trillion, pre-tax profit rose by 66.7 per cent, down from the 86.3 per cent advance in gross earnings.
A further squeeze came from income tax expense, which rose by 147 per cent to about N294 billion, further slowing down the increase in after-tax profit to 52.6 per cent to close at N1.03 trillion for the year. Zenith Bank lost its net profit margin in the year from 31.7 per cent in 2023 to 26 per cent in 2024.
First Holdco
For the second year, First Holdco has seen renewed strength in converting its assets into revenue, combined with a growing balance sheet to achieve the strongest revenue growth rates among the tier-one group.
The bank’s total assets grew by 56.6 per cent to N26.52 trillion in 2024, but this produced a 101.4 per cent leap in gross earnings to N3.21 trillion, the leading revenue improvement for the group in the year. The second level is enhanced strength in converting the revenue into profit, which is where the bank differed from most of the members of the tier-one players.
The increase in gross earnings produced yet a more rapid increase in profit, showing quite an impressive cost-income combination model in 2024. After-tax profit grew by 113.7 per cent to N663.5 billion for First Holdco in 2024, showing gains in margins.
Revenue growth and moderated costs are the underlying functions in the bank’s elevated profit delivery in 2024. Interest income led revenue growth in the year at an increase of 149.6 per cent to almost N2.40 trillion, while non-interest earnings improved by 25.6 per cent to N755.6 billion.
Breaking the trend of incursion of cost of funds, the bank held interest expenses to a slower growth than interest earnings. At N996 billion, interest expenses grew by 142 per cent against the nearly 150 per cent advance in interest income. The cost saving lifted net interest income by 155.3 per cent to N1.40 trillion, while a slowdown in net loan impairment charges multiplied net income more than three times to N975 billion.
The bank’s management also extracted significant cost savings from operating expenses, where other banks devoted increased revenue proportions. Total operating cost moderated relative to revenue at an increase of 65.5 per cent to N934.2 billion, which lowered the operating cost margin from 35.4 per cent in 2023 to 29.1 per cent in 2024.
Net profit margin increased from 19.3 per cent in the previous year to 20.9 per cent in 2024, the highest margin for the bank in many years. Strong revenue gain combined with increased ability to convert the same into profit is First Holdco’s new strength that powered strong profit delivery in 2024.
GTCO
GTCO’s operational model maximised the yield of assets into revenue and the conversion of revenue into profit among the tier-one banks in 2024. Its unique operating structure enabled it to beat banks with much bigger assets and revenues in profit delivery to shareholders.
The bank’s balance sheet size of N14.80 trillion at the end of 2024 operations, the least among the tier-one players, grew by 52.7 per cent in the year. The naira of assets yielded 14.5 kobo of revenue, the highest asset turnover among the group. The outcome is a stronger gross earnings growth of 81 per cent, amounting to N2.15 trillion for the year.
With an increase of 143.6 per cent, interest earnings led revenue growth in the year to N1.34 trillion, while non-interest income rose by 24.8 per cent to N775 billion. While interest expenses grew ahead of interest income at 148.3 per cent to N283.2 billion, the relative smallness limited the impact of cost of funds on earnings.
Interest expenses claimed as low as 21 per cent of interest income, a distant low among the tier-one banks. The low-cost disposition permitted a strong growth of 142.4 per cent in net interest income to N1.06 trillion. This was reinforced by a sharp slowdown in net loan impairment expenses, which increased by 32.7 per cent to N136.7 billion. Net interest earnings after loan impairment charges grew by 176.2 per cent to close the year at N921.9 billion.
The bank’s management also saved a lot of costs from operating expenses, which moderated at an increase of 60.9 per cent to N403 billion. Operating costs margin dropped from 29 per cent in 2023 to 20 per cent in 2024, the lowest cost margin the bank has seen in many years.
Conversely, the bank’s leading net profit margin attained a new high of 46.8 per cent in 2024 from 45 per cent in 2023. Pre-tax profit rose by 107.8 per cent to N1.27 trillion, while a major increase in income tax expenses slowed down the margin of increase in after-tax profit to 88.6 per cent to stand at N1.02 trillion for the year.
The route to profit
Last year, the banks adopted different approaches to grow wealth for shareholders, with differing results. For Access Holdings, asset building is critical to profit delivery in the face of low asset turnover and low profit margins. The bank had more assets than others to generate the same revenue and earn a profit.
Access Holdings’ approach took a comparatively longer route, and with the new equity injection in the year, rates of return fell from the heights attained the previous year. Return on assets went down from 2.3 per cent to 1.5 per cent and return on equity dropped from 28 per cent to 16.5 per cent over the period.
Earnings per share also dropped from N17.23 to N11.60, but cash dividend payout improved from N2.10 to N2.50 over the review period.
UBA made up for its weakness in asset turnover with strength in profit margin, enabling it to achieve reasonable profit growth. While it lost profit margin, the margin remained good enough to provide the strength for profit improvement. Finding strength in at least one of the two operational flows provided a less difficult route for the bank to build wealth for shareholders.
The bank recorded a return on assets of 2.5 per cent and return on equity of 21.7 per cent in 2024, which are declines from 2.9 per cent and 29.5 per cent, respectively, in 2023. Earnings per share rose from N17.49 in 2023 to N21.73 in 2024, and cash dividend per share climbed from N2.80 to N5 over the same period.
Zenith Bank rode on top record asset turnover and profit margin to speed up profit delivery to shareholders in 2024. Enhanced asset yield made up for a slowdown in asset growth, and with one of the industry’s leading profit margins, it found one of the shortest routes to grow wealth for shareholders in 2024.
Profit delivery was strong enough to tick up return on assets from 3.3 per cent in 2023 to 3.4 per cent in 2024 but return on equity declined from 29.1 to 25.6 per cent over the period of fresh equity injection last year.
Despite the increased volume of shares, earnings per share improved from N21.55 in 2023 to N25.15 in 2024, and cash dividend per share improved from N4 to N5 over the period.
First Holdco gained strength on both sides of the operational flow – assets into revenue and revenue into profit and finished the 2024 trading with the best records on asset turnover and profit margin in years. This is the easiest route to growing wealth for shareholders, which was again recharged by a strong growth in earning assets.
Following the easy route, the bank’s naira assets generated stronger revenue growth, and the naira revenue turned in yet stronger profit growth. Return on assets increased from 1.8 per cent in 2023 to 2.5 per cent in 2024 and return on equity rose from 17.6 to 24 per cent.
Earnings per share more than doubled from N8.59 to N18.69 over the period, and cash dividend payout improved from 40 kobo to 60 kobo per share.
GTCO sailed smoothly on a favourable wind of its most effective operational flow in 2024. The bank grew asset volume, improved asset yield and profit margin, which lifted profit above the figures attained by far larger banks. Asset turnover and profit margin reached distant heights unmatched by peers.
In other words, the naira of assets yielded an increased proportion of revenue for the bank, and the naira of revenue produced an increased proportion of profit. The bank’s management increased the efficiency volume by expanding the asset volume in the year.
The move paid off with further elevation of already leading rates of return. Return on assets improved from 5.5 per cent in 2023 to 6.8 per cent in 2024 and return on equity went up from 36.2 to 37.1 per cent. This is despite an outstanding increase of 83.6 per cent in equity capital to N2.71 trillion in the year.
Notwithstanding the increased volume of shares from new capital injection, earnings per share rose from N18.16 in 2023 to N29.48 and cash dividend per share improved from N3.20 to N8.03.
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