Banks Resilient, Record 6.8% Profit Growth In H1, 2021

Nigerian banks recorded 6.8 per cent growth in profit in the first half of 2021 as the sector strived to remain resilient during the COVID-19 pandemic, according to a new report.

Afrinvest West Africa said this in the report, titled ‘2021 Nigerian banking sector report resilience amidst endemic and pandemic constraints’.

While presenting the report in Lagos, the Managing Director, Victor Ndukauba, said, “Industry stays strong in a pandemic-induced environment amidst the tough macro and tight regulatory environment, banks remained resilient.

“This is evident in banks delivering a 15.6 per cent and 6.8 per cent year on year growth in total assets and profit respectively in H1:2021 despite elevated CRR debits and compulsory Loan to Deposit Ratio levels. With the pandemic, the Nigerian banking sector vulnerability heightened which required swift policy responses from the CBN.

“Consequently, the CBN rolled out stimulus packages to critical sectors with significant loan exposure, reduced interest rate on intervention facilities (from nine per cent to five per cent) and granted banks the forbearance to restructure loan exposure. As a result, real GDP growth in the financial institutions sector grew by 13.3 per cent year on year).”

He noted that the sector’s earnings and profitability slowed in 2020, hurt by the stringent implementation of the CRR policy (27.5 per cent), which he said “effectively sits at north of 50.0 per cent for some banks due to CBN’s non-refund policy and the discretionary excess debits”.

He added that the low interest rate environment in H2 2020 and H1 2021 drove weak yield on assets for the sector despite the drive to expand asset base.

The Chairman, Afrinvest, Donald Lawson, said, “For 26 years now, Afrinvest has remained at the fore of economic and business research in Nigeria and West Africa and built a solid reputation as a leading independent investment firm with market leadership across investment banking, asset management, investment research, and securities trading services.

“The annual Afrinvest Banking Sector Report, our flagship report, provides an incisive and in-depth analysis of the Nigerian banking industry, making sense of developments to guide informed decision-making for all stakeholders.

He said the company analysed socio-economic trends to provide context and share its views on the critical issues confronting the Nigerian economy.

“For 2021, we assessed the performance of the banking sector in light of the ongoing economic recovery and the lingering pandemic. In the same vein, we explored the dynamics in the regulatory stratosphere, measured their potential impacts, and connected the dots in the emerging trends within the banking industry,” Lawson added.