By Chukwuma Umeorah
Access Corp, Zenith Bank, and First Bank of Nigeria Holdings (FBNH) have emerged as the strongest operating banks in Proshare’s 2024 Tier-1 Banks Report.
According to Proshare’s Bank Strength Index (PBSI) for 2024, this report evaluated banks using a variety of financial metrics based on audited financial statements for the Financial Year (FY) 2023.
The Managing Editor/Chief Economist, Proshare Nigeria, Teslim Shitta-Bey during the Presentation of the Report in Lagos highlighted that “Tier 1 banks tend to edge out their counterparts in big-ticket public and private sector transactions, emphasizing the need for continuous revision of evaluation metrics, especially in a landscape where ‘big appears to be beautiful.”
Commending the efforts of the Central Bank of Nigeria (CBN) in strengthening the operational capacity of banks through targeted regulatory reforms, Shitta-Bey projected increased bank loans and advances among other things following banks’ recapitalization exercise.
According to him, “The banking sector recapitalization program is expected to bring significant changes between 2024 and 2026, with investments in financial technology, customer service scalability, and digital asset engineering taking a fresh turn.
“With higher capital levels, banks must utilize the larger amounts of cash available to improve shareholder returns and customer service experiences.”
Shitta-Bey however stated that raising Nigerian banks’ equity base is no guarantee for economic growth and development, urging for a whole – of-government approach and re-evaluation of policies, programmes, and processes.
He stated, “Nigeria’s GDP in 2005 was N38.78trn and rose to 77.94trn, roughly two times in 2023, suggesting an average annual growth rate of 3.55 per cent in the last two decades. However, between 2000 and 2005, bank equity sizes grew over ten times or by 1,150 per cent from N2bn to N25bn.
“In other words, for a decade and a half, banks have used ten times more equity in their businesses than before 2005, yet the country’s GDP growth has been modest.”
Shitta-Bey advised banks’ to develop a deliberate strategy to transition from cash flow to value creation so to effectively utilize additional capital from the recapitalization exercise.