Market Intelligence

GTBank, Zenith Bank has the highest ROE


March 12, 2018 | 12:45 am
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  ROAE (Post tax) ROAA (Post tax) Cost-to-income ratios Capital adequacy ratio
GTBank 33.20% 5.29% 36.30% 22.90%
Zenith 23.40% 3.50% 46.2 22.20%
FBNH 10.10% 1.30% 53.40% 17.20%
Access 15.70% 2.10% 64.30% 20.50%
UBA 17.00% 2.20% 61.50% 18.70%

Source: Company Financials; M and 1

Guaranty Trust Bank (GTBank) and Zenith Bank have the highest Return On Equity (ROE) among Nigerian banks.

Both lenders recorded an ROE of 33.20 percent and 23.40 percent as at nine months to September 2017.

What this means is that these lenders are effective in turning the cash put into the business into greater gains and growth for the company and investors.
The higher the return on equity, the more efficient the company’s operations utilises available funds.

This is unsurprising as the share prices of the two lenders have been growing since last year and the rally has continued into 2018, and of course investors will buy into the stock of firms with strong earnings growth, excellent risk management strategy and solid capital buffers.

Both banks have a higher price to book ratio, which reflect greater expected future gains because of perceived growth opportunities and/or some competitive advantages and/or lesser risk.

GTBank and Zenith are trading at 2.45x and 1.26x book values, while their shares gained .

According to the CBN’s stability report, the pre-shock ROA of the banking industry, large, medium and small banks were 0.25, 0.26, 0.22 and 0.18 per cent respectively, while the ROE of the banking industry, large, medium and small banks were 3.84, 3.53, -5.06 and 1.04 percent in June 2017.

Tier1 lenders otherwise known as the big banks in Africa’s most populous nation and largest economy have been navigating the storm of headwinds.
Income from interest income on loans and advances and short term government securities, excellent risk management strategy, solid capital buffers helped these lenders overcome legacy issues like the power sector loans.

The introduction of the flexible exchange rate by the apex bank and a rebound in oil production and crude oil price resulted in flow of foreign direct investment into the country while contemporaneously paving the way for banks to have access to dollars.




March 12, 2018 | 12:45 am
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