GTCO, UBA Top Others as Most Profitable Lenders by RoE in 2023FY

Kayode Tokede

On the backdrop of impressive earnings, Guaranty Trust Bank Holding Company Plc (GTCO) and United Bank for Africa Plc (UBA) outpaced other banks as the most profitable financial institutions by Return on Equity (RoE) in the 2023 financial year.

RoE is a ratio that provides investors with insight into how efficiently a company (or more specifically, its management team) is handling the money that shareholders have contributed to it.

GTCO, according to THISDAY investigations declared 44.82 per cent RoE from 18.65 per cent in 2022.

The 23.61 per cent RoE growth recorded by GTCO showed efficiency in generating income and growth from its shareholders amid a punitive regulatory environment.

“The Group’s performance remained resilient and responsive in the face of daunting challenges ranging from elevated inflation, heightened FX risks that characterised most of 2023 financial year.

“It adapted by deploying timely, appropriate, and efficient strategies to navigate the vagaries of macros across its Jurisdiction of operations, posting pre-tax Return on Average Equity of 44.80,” the bank said in a presentation to investors and analysts.

The total dividend payout by GTCO management stood at N3.20 kobo for 2023 financial year, about three per cent increase from N3.10 kobo paid to shareholders in 2022 financial year.

UBA closely trailed GTCO as its RoE closed 2023 FY at 41.20 per cent from 19.70 per cent reported in 2022. 

The Pan-African financial institution in 2023 performance reported N757.7billion profit before tax, an increase of 277 per cent from N200.9 billion in 2022, while its profit after tax stood at N607.7 billion in 2022, a growth of 257 per cent from N170.3 billion reported in 2022.

Other banks with RoE above 30 per cent include: Wema Bank Plc with 39.28 per cent RoE in 2023 from 19.28 per cent in 2022; Zenith Bank with 36.60 per cent RoE in 2023 from 16.80 per cent in 2022

Others are:  Access Holdings Plc with 36.20 per cent RoE in 2023 from 13.30 per cent and Stanbic IBTC with 30.60 per cent RoE in 2023 from 20.30 per cent reported in 2022.

Among the investigated banks, Sterling Financial Holdings Company Plc reported the lowest RoE in 2023 financial year at 12.8 per cent from 13.3 per cent declared in 2022.

Sterling Financial Holdings Company recorded a growth of 9.3 per cent in profit before tax to N22.7 billion in 20233 from N20.8 billion in 2022 and a growth of 11.8 per cent in profit after tax to N21.6 billion from N19.3 billion in the previous year, while earnings per share also grew by 11.9 per cent to 75k from N0.67kobo in 2022.

“Nigerian banks have to deal with economic shocks, short credit cycles and persistent problems in the oil sector. They also have to deal with policy actions, policy uncertainty and regulatory risk,” said Vice President Highcap Securities, Mr. David Adnori.

“Nigerian banks compared to other markets operate in a volatile environment,” he added.

Fitch Ratings, had predicted that Nigerian banks’ operating environments could deteriorate in 2022/2023 as adverse global economic conditions feed through to the local economy.

The global rating agency stated that pressures on Nigerian banks’ profitability and asset quality would be higher than initially expected due to high inflation and a potential economic slowdown.

It noted that Nigerian banks are expected to face these headwinds despite higher oil prices.

“We expect interest rates to increase further given accelerating inflation and tighter global financial conditions. This should support the banks’ net interest margins, which have been dented by low rates in recent years,” Fitch said.