Nigeria's banking sector is an attractive point of interest for several investors, as many believe in their potency to not only deliver effective holding and lending services to customers but ultimately in their ability to stay profitable over time and bring returns on investment.
On the floor of the Nigerian Exchange, there are 13 banks listed for equity trading. However, only five of these banks recorded returns on equity (ROE) higher than 10 percent.
Return on Equity is a financial ratio derived by dividing the net income by the shareholders’ equity or net assets, in the same period.
To simplify, ROE tells an investor how much profit one unit of his shareholder’s equity has generated in that period. The higher the ROE, the more efficient a company’s management is at generating income and growth from its equity financing.
Here are the five Nigerian banks whose returns on equity exceeded 10 percent:
Access Bank's Return on Equity currently stands at 14.12 percent, meaning that for every unit of shareholder’s equity held, 14.12 kobo was generated as profit in 2020.
In its 2020 financial year, the bank reported a net income of N106.01 billion, reflecting a growth of 12.70% from N94.06 billion in the corresponding period of 2019. The bank’s audited report also showed that its Net Assets for the period stood at N751.04 billion.
In the first quarter of 2021, the bank’s ROE was pegged at 6.63% as net income stood at N52.55 billion from N40.93 billion in the corresponding quarter of 2020.
As of report time, Access Bank's share price stood at N9.20 with a market capitalisation of N327 billion.
United Bank for Africa (UBA) Plc's return on equity stands at N15.71%, which implies that at the end of the 2020 financial year, each shareholder’s equity within the bank generated 15.71 kobo as profit.
In the 2020 audited report, UBA Plc reported a net income of N113.77 billion, which was a 27.70% improvement from N89.09 billion in 2019. In the same period, net assets for the bank stood at N724.15 billion.
However, in the first quarter of 2021, UBA Plc had an ROE of 5 percent as net income increased to N38.16 billion from N30.10 billion in the corresponding quarter of 2020.
As of report time, UBA was trading at N7.6 per share and has a market capitalisation of N260 billion.
Zenith Bank Plc recorded a return on equity of 20.63% at the end of 2020, thereby enriching equity shareholders with a profit of 20.63 kobo for every unit held in the bank during the period.
According to the bank’s audited report, a Net Income of N230.57 billion was recorded for the full year 2020, translating to a growth of 10.41% from N208.84 billion in 2019. Net assets for the same period stood at N1.12 trillion, making Zenith Bank the only bank with net assets worth a trillion.
In the first quarter of 2021, the bank had a Return on Equity of 4.86% as net income stood at N53.06 billion from N50.53 billion in the corresponding quarter of 2020.
At the last close of the stock markets, Zenith Bank traded at N24.45 per share, and had a market valuation of N771 billion.
Stanbic IBTC plc has the second-highest Return on Equity relative to other banks listed on the exchange. The bank recorded a Return on Equity of 21.98%, which means that for every unit of shareholder’s equity held, 21.98 kobo was generated as profit in the period under review.
The group reported a 10.89% growth in net income of N83.21 billion compared to N75.04 billion generated in 2019. In the same period, Net Assets for the group stood at N378.60 billion as of December 2020.
Stanbic IBTC, in Q1 2021, recorded an ROE of 2.93% as net income dipped to N11.26 billion from N20.60 billion in the corresponding quarter of 2020.
Stanbic’s share price last closed at N41.00 and has a market cap of N531 billion.
GT Bank currently has the highest Return on Equity of 24.73% in 2020, suggesting that for every unit of shareholder’s equity held, 24.73 was generated as profit in the year.
The bank reported a net income of N201.44 billion, to reflect a marginal growth of 2.33% from the previous year. In the same period, the Net Assets of the bank stood at N814.40 billion.
In the first quarter of 2021, GT Bank (Now GT HoldCo) recorded an ROE of 5.44% as net income stood at N45.55 billion from N50.07 billion in the corresponding quarter of 2020.
GT HoldCo’s share price as of press time stood at N29.05 with a market capitalisation of N839 billion.