Effectively using Tier 1 banks for economic growth


Recently, the former Governor of the Central Bank of Nigeria (CBN), Chukwuma Soludo reportedly said that without the banking consolidation he was overseeing, there would be no mega-corporations in the country and the wealthy would not be where they are. are today.

Soludo, who is now Governor of Anambra State, said that no bank in Nigeria was among the top 1,000 banks in the world and if one needed to make an investment of $500 million, you had to go through the 39 banks of the time. However, after the consolidation exercise, 25 healthy banks emerged while 14 were scrapped and cleaned up the system.

Three years after consolidation, 14 Nigerian banks ranked among the top 1,000 banks in the world, and two of them among the top 300 banks in the world. Also, before, if you wanted to borrow abroad, there was no bank here to guarantee that. This is when the Nigerian banks started to have the muscle to be able to compete with the big corporations. Moreover, before banking consolidation, mega-corporations were impossible in Nigeria, including airlines.

The story is different today as Nigeria now has major banks, which are rated and ranked using indices such as Tier 1, 11 and 111 as well as others, by local rating agencies and world. Bank or Tier 1 capital refers to the base capital held in a bank’s reserves and is used to finance the business activities of the bank’s customers. It includes common stock, as well as disclosed reserves and certain other assets. Along with Tier 2 capital, the size of a bank’s Tier 1 capital reserves is used as a measure of the institution’s financial strength. In other words, Tier 1 banks are considered the backbone of Nigeria’s financial and economic system. They are called “too big to fail” banks because of their importance to the economy.

In Nigeria, these banks control more than three-quarters of banking assets and they are considered representatives of the entire banking system. Currently, these are Access Bank, which leads the pack with an asset size of N11.73 trillion, then ETI (N11.69 trillion), Zenith (N9.45 trillion ), UBA (8.50 trillion naira), FBNH and GTB complete the list of top tier banks with registered assets above the 5 trillion naira threshold.

However, according to the Proshare Bank Strength Index (PBSI) calibration, FBNH and ETI fall out of the tier 1 category, while Fidelity Bank and Stanbic make their first entry into the tier 1 bank class. “But this is not a surprise, since both FBNH and ETI have recorded NPLRs above the five percent threshold and would in fact technically be considered Level 11 banks even under the old paradigm. “

According to Proshare, this result is an index that ranks Nigerian banks according to their aggregate points of CAR, NPL, LR and Board’s Gender Mix (a governance indicator). These performance ratios were selected after questioning half a dozen other variables, namely: Assets Size (Ass), Gross Earnings (GRE), Net Interest Margin (NIM), Cost to Income Ratio (CIR), Digital Earnings, Loans to Deposit Ratio (LDR) Cost of Risk (CoR) and ratio of non-executive directors to total number of directors

The assets of Nigerian Tier 1 banks have increased by 4 trillion naira to more than 46 trillion naira, according to the latest internal audits of major banks, also known as systemically important banks. According to relevant reports, the total assets of top tier banks increased from around N42.2 trillion at the start of the year to over N46 trillion by the end of the third quarter ended September 30, 2021.

An analysis of the financial statements of major banks for the year ended December 31, 2021 revealed that Access Bank led the banking industry in terms of total assets, followed by Ecobank Transnational Incorporated (ETI). Others are; Zenith Bank Plc, United Bank for Africa Plc, Guaranty Trust Holding Company Plc (GTCO), Fidelity Bank Plc, Wema Bank Plc, FCMB Group Plc and Stanbic IBTC Holding Plc.

According to the 2021 financial report, Access Bank’s total assets increased by 35.2% to N11.73 trillion from N8.67 trillion in 2020, while ETI reported total assets of 11.56 trillion naira in 2021, an increase of 11.32 trillion naira in 2020.

Further analysis showed that Access Bank customer deposits totaled N7 trillion in 2021 compared to N5.6 trillion in 2020, while net loans and advances totaled N4.4 trillion in 2021 compared to 3.6 trillion naira declared in 2020.

For Zenith Bank, its total grew by 11.4% to N9.45 trillion in 2021 from N8.48 trillion in 2020. Zenith Bank’s total asset growth was driven by an increase of 21 % of customer deposits in 2021, with gross loans up 20%. , driven by both corporate and personal credit activities.


Banking institutions contributed 2.3 trillion naira to the country’s real gross domestic product (GDP) in 2021, up 10.5% from 2.1 trillion in 2020. GDP, fourth quarter report 2021 from the National Bureau of Statistics (NBS) shows that the contribution of banks and other financial institutions to real GDP increased slightly by two basis points to 3.2%, from 3.0% in 2020.

According to the SNB report, banks, financial institutions excluding insurance, recorded year-on-year growth in real terms over three quarters in 2021, namely the first, third and fourth quarters. In the first quarter of 2021, the segment recorded a year-on-year growth of 0.15% to N555.6 billion, compared to N554.72 billion in the first quarter of 2020. The contribution affects all sectors of the economy.

Nigerian banks recognize the need to extend their services to financially excluded customers. The financial inclusion rate increased from 56.8% in 2016 to 63.2% in 2018. The target for 2020 was 70%. There is still a huge market to explore and banks can leverage more technology, service design and marketing to provide affordable financial services.

Banks do not neglect their corporate social responsibility (CSR). Twelve commercial banks in the Nigerian Stock Exchange donated N22.82 billion as part of CSR in 2021, up 27.5% from the N17.8 billion donations made l ‘last year.

Fidelity Bank contributions via these indices

Fidelity Bank, which is a fully-fledged commercial bank operating in Nigeria and listed on the Nigerian Stock Exchange (NGX), began operations in 1988 as a Merchant Bank. In 1999, it transformed into a commercial bank and became a universal bank in February 2001.

The bank has a broad reach across all distribution channels, including 250 trade offices and a robust digital banking platform. Focused on certain niche corporate banking business segments as well as micro, small and medium-sized enterprises (MSMEs), Fidelity Bank is rapidly implementing a digital-enabled retail banking strategy that has resulted in an increase in customers and double-digit growth in savings deposits for nine consecutive years. years.

Over 56% of the bank’s customers are registered on the bank’s mobile/internet banking platform, while 90% of total customer transactions are now conducted through its electronic banking channels.

Fidelity Bank is renowned for its integrity and professionalism. It is also respected for the quality and stability of its management team which is focused on building and maintaining a manly and widely accepted brand to meet the needs of its growing customer base.

In the financial year that ended in December 2021, the bank recorded a 35.7% growth in profit before tax (PBT) to end the year at N38.1 billion according to financial result form the bank. Analysis of the results indicates that the bank increased its gross revenue by 21.6% year-on-year (23.2% quarter-on-quarter) to N250.8 billion, thanks to a combination of 60.3% growth non-interest income (NIR) and 15.2% increase in interest. and similar income.

NIR growth reflects significant increase in customer transactions, leading to 84.9% growth in trade revenue, 48.1% growth in account maintenance fees and a 47.2% increase in bank revenue digital.

The bank ended the year with strong double-digit growth in earnings and major balance sheet lines, reflecting the disciplined execution of its strategy and its ability to deliver superior returns to its shareholders. Pre-tax profit increased by 35.7% to N38.1 billion from N28.1 billion in 2020, resulting in an increase in RoAE to 12.5% ​​from 10.5% in 2020 .

Other areas of financial income saw significant increases during the review period, with total interest and similar income increasing by N26.8 billion. Similarly, total deposits increased by 19.2% to N2,025 billion from N1,699 billion in 2020, local currency deposits increased by 16.0% and accounted for 80.3% of total deposits. total deposits, while foreign currency deposits increased by 33.9% and represent 19.7% of total deposits, compared to 17.5% in 2020.

Detailing the contribution of the bank’s digital-first retail strategy to its financial performance, the bank’s chief executive, Nneka Onyeali-Ikpe, said, “Digital banking has gained traction through new initiatives in our retail business and improving existing digital banking products. . We now have 56.0% of our customers enrolled in mobile/internet banking products and 90.0% of total customer-driven transactions conducted on digital platforms, with digital banking activities contributing 27.6% to net income commissions.

Despite the headwinds occasioned by the Covid-19 pandemic, the Bank’s share price rose by 35% between January 2021 and April 1, 2022, placing it among the most actively traded stocks on the Nigerian trading floor. The Bank’s share price performance reflects strong investor confidence in its strong fundamentals and management team.

Currently, Fidelity Bank is broadcasting a radio program on Inspiration FM, Lagos, to educate MSMEs and give them the information needed to access loans from their bank. They have raised the bar by going a step further to also create a managed MSME division within the bank’s structure to cater to the needs of MSMEs. It currently oversees 250 business offices, 774 ATMs and 4,046 point-of-sale terminals. Net income: NGN 26.65 billion (2020). Total assets: NGN 2.89 trillion (3/2021

In 2021, the bank received several awards and accolades, including the Citibank Straight-Through Processing (STP) Excellence Award, with 2021 being the 10th consecutive year to receive this prestigious award for efficiency in international correspondent banking transactions. In addition, your bank received the Business Day Awards for Fastest Growing Bank of the Year and MSME and Entrepreneurship Finance Bank of the Year, as well as the Development Bank Award of Nigeria (DBN) for the Participating Financial Institution (PFI) with the highest disbursement in the locations targeted by DBN.


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