Five banks, a cement maker and a telecommunication company were among Nigeria’s seven most profitable publicly-listed companies in the first half of 2023.
The seven companies – United Bank for Africa Plc (UBA), Zenith Bank Plc, Guaranty Trust Holding Company, Dangote Cement Plc, FBN Holdings Plc, MTN Nigeria Communications Plc and Access Holdings Plc – were able to weather the storm of an acute cash crunch, accelerating inflation, naira depreciation, and hike in fuel and diesel prices.
The companies posted a combined profit before tax of N1.89 trillion in the six months to June 2023.
Banks dominating the list of most profitable companies is very unlike the global trend where technology and oil companies lead the pack of profitable companies.
Analysts have attributed the increased profitability of Nigerian banks to revaluation gains on their net long US dollar income positions.
On June 14, 2023, the Central Bank of Nigeria merged all foreign exchange markets into the Investors and Exporters window and reintroduced the willing buyer, willing seller model.
As a result, the official exchange rate increased from N463.38/$ to N747.8/$ today.
Tochukwu Okafor, a senior lecturer at Baze University, attributed the banks’ financial performance to the devaluation of the naira. He highlighted that most tier-one banks have international affiliations, with a significant portion of their assets denominated in dollars. As a result, the devaluation has led to a substantial increase in their profits, he said.
“In the history of banking, hardly any bank has ever declared profits of up to N400 billion annually, not even in a half-year period. However, due to the devaluation and the transition from a pegged exchange rate to a freely floating one, banks have experienced a significant spike in their declared profits in the first half of 2023,” he said.
He said a substantial portion of this increased profitability is attributed to non-interest income. The devaluation has affected fees, commissions, off-balance sheet transactions, and other non-interest income sources, which now contribute significantly to the banks’ higher profits.
“According to their financial statements, a significant portion of their profits is derived from non-interest income, and this portion has grown in recent periods,” Okafor added.
UBA (N404 billion)
UBA posted the biggest profit before tax amounting to N404 billion, an increase of 371 percent compared to the N85.75 billion in H1 2022.
The group delivered a 164 percent growth in its gross earnings to N981.78 billion, up from N372.36 billion.
Basic and diluted earnings per share stood at N10.95 from N1.98.
Zenith Bank (N350.4 billion)
Zenith Bank reported N350.4 billion profit before tax, up from N130 billion.
The bank recorded a 139 percent growth in gross earnings from N404.8 billion, driven by both interest income and non-interest income. Basic and diluted earnings per share stood at N9.29 per share from N3.55 per share in the comparable periods.
Its cash and cash equivalents amounted to N2.4 trillion, up from N972.9 billion.
GTCO (N327.4 billion)
GTCO’s profit before tax jumped to N327.4 billion from N103.3 billion.
The holding company’s gross earnings amounted to N672.6 billion from N239.29 billion. Its basic earnings per share to N9.94 per share from N2.70 per share in the comparable period.
GTCO recorded the highest cash and cash equivalents which stood at N2.5 trillion, from N1 trillion in 2022.
Dangote Cement (N239.86 billion)
Dangote Cement’s profit before tax stood at N239.86, down from N264.890 billion in H1 2022.
Dangote Cement’s revenue grew to N950.83 billion from N808.04 billion.
Dangote Cement’s net exchange loss on foreign-denominated transactions stood at N113.63, up from N40.66 billion in H1 2022.
According to the company’s six months of unaudited results, sales volume for pan-African operations was up 11.6 percent to 5.4Mt from 4.9Mt in H1 2022. The total pan-African volume accounts for 40.4 percent of group volumes in the half year.
The pan-African operations performance is attributable to robust demand, particularly from Ethiopia, Senegal, Zambia, and Congo. Hence pan-African revenues grew by 81.8 percent to N336.4 billion.
FBN Holdings (206.3 billion)
FBN Holdings’ profit before tax rose to N206.3 billion from N65.7 billion.
Its gross earnings rose 82.8 percent to N656.6 billion from N359.2 billion. Basic earnings per share stood at 519 kobo from 155 kobo. FBN Holdings’ cash and cash equivalents amounted to N1.52 trillion from N1.45 trillion.
MTN Nigeria’s profit before tax declined to N200.39 billion from N331.8 billion in H1 2022.
The telco giant recorded revenue growth of 21.96 percent to N1.15 trillion from N950 billion in the same period last year.
Access Holdings reported a profit before tax of N167.6 billion, translating into a 71.4 percent year-on-year growth.
It witnessed a 35 percent year-to-date growth in customer deposits to N12.5 trillion.
This growth was inclusive of all business segments, firmly solidifying the group’s stature as the largest financial institution in Nigeria by total assets.
The group reported robust gross earnings of N940.3 billion, reflecting a year-on-year growth of 58.9 percent. This substantial surge in gross earnings was driven by a combination of a 63 percent growth in interest income and a 51.9 percent increase in non-interest income.