Despite the harsh effects of the coronavirus (COVID-19) pandemic that trimmed physical banking activities for over three months, some banks quoted on the Nigerian Stock Exchange (NSE) earned a total of N1.6 trillion in the first half of 2020 financial year.
While it was expected that financial institutions, particularly banks would struggle to post good results for the period under review, a combination of investments in alternative channels, growth in customer acquisitions changed the supposed narrative in the banking sector.
Some of the banks including Access Bank, First Bank of Nigeria, Guaranty Trust (GT) Bank, United Bank for Africa (UBA) and Zenith Bank Plc recorded impressive results during the period under review .
Daily Sun analysis revealed that Access Bank led the chart with N396.76 billion, while First Bank followed closely with N300.14 billion.
During the same period, GT Bank also posted N225.14 billion, UBA earned N300.61 billion, while Zenith Bank made N346.08 billion, all of which summed up to a total of N1.56 trillion
Meanwhile financial experts have urged the reporting banks to grow their transaction volumes to ensure that interest earning assets and interest income are not pressured in the next financial year.
This comes as they predicted the LLE line in 2020 Full Year (FY), even without significant Non-Performing growth (NPLs) growth, given regulatory forbearance expected in the wake of the impact of COVID-19 on the economy.
Partner, Gifted Analysts, Samuel Adebisi, in a research note said that impairments of the banks were over the roof understandably because some of their customers were not operating on full level due to the COVID-19 pandemic which also impacted the banks’ full level as well.
Adebisi thereafter advised financial institutions to ease pressure on their LLEs by lowering cost of funds while urging them to also grow transaction volumes.
“These banks should lower their cost of funds and try to increase the net interest margin. For banks, they should look for more ways to deplore funds. We know that the CRR has increased, the policies are coming in and so i would like to see them grow more deposits so as to grow their interest earning assets, interest income. As regards non-interest income, i would like to see these banks grow transaction volumes as this is a period where people are moving away from cash to mobile payments despite the reduction in rates of electronic transfers”, he said.
At Cordros Capital, analysts said that while the banks’ performance came under pressure as expected, the reason for the relative earnings decline was not expected. From the numbers posted, we have started to see the impact of much-increased risk asset creation, which has also affected LLEs. We expect pressure on that line in 2020 FY, even without significant NPLs growth, given regulatory forbearance expected due to the impact of COVID-19 on the economy”.