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By Chinwendu Obienyi
Even though many big and mid-sized banks got stronger over seven years, boosting their reserves, profits and risk control, the returns investors made from their shares differed sharply, largely based on how high or low the stock prices were at the beginning.
This submission came from a report by MoneyAfrica released over the weekend.
The report, seen on X by Daily Sun, shows that in Nigeria’s banking sector, investor returns were driven less by how well banks performed and more by where share prices started, how earnings built up over time and ongoing pricing gaps in the market.
At the top of the return spectrum, Fidelity Bank delivered the strongest performance, recording a compounded annual growth rate of about 63 per cent.
The key driver was not just earnings growth, but its deeply discounted entry point in 2019, when it traded at roughly 0.2x price-to-book value. As earnings improved and sentiment shifted, the stock experienced a sustained re-rating, amplifying returns over the period.
By contrast, higher-quality names such as Stanbic IBTC Holdings generated more moderate but still strong returns of about 31 per cent CAGR. In this case, returns were driven primarily by steady earnings compounding rather than multiple expansion, reflecting the market’s already elevated expectations at the starting point.
According to the report, the pattern reinforces a central theme across the cycle, where valuation compression at entry created more room for upside than operational strength alone.
Operationally, GTCO Plc stood out as the most efficient operator in the sector. It recorded an average return on assets (ROA) of 5.2 per cent and return on equity (ROE) of 28.6 per cent, supported by a cost-to-income ratio of 31.8 per cent, the lowest among peers. This efficiency gap has remained a defining feature of its performance profile, allowing it to consistently generate superior profitability per unit of cost.
Zenith Bank, meanwhile, maintained its position as the sector’s balance sheet anchor. It posted a capital adequacy ratio (CAR) of 25 per cent and the lowest non-performing loan (NPL) ratio at 2.6 per cent, underscoring its conservative risk posture.
The bank also remains the largest profit generator in absolute terms, with annualised profits of approximately N1.25 trillion over the period. Despite these strengths, the stock still trades slightly below book value at around 0.9x price-to-book, suggesting limited re-rating despite strong fundamentals.
Elsewhere, Access Bank and United Bank for Africa (UBA) continue to trade at deep valuation discounts of roughly 0.3x and 0.4x price-to-book respectively, even as both maintain systemic scale and regional diversification. Wema Bank delivered strong income generation, reflected in an 8.3 per cent net interest margin, but this came with a higher risk profile, including a 4.9 per cent non-performing loan ratio, still within regulatory thresholds.
Across the sector, the valuation dispersion remains striking. High-efficiency and niche players have commanded premiums, while large systemic banks continue to trade at discounts despite stable earnings trajectories. The result is a market that appears less driven by uniform re-rating and more by selective investor confidence
