- Nigerian banks’ cross-border expansion aimed at seeking incremental value has continued to boost their bottom lines.
- In 2023, four Tier-1 Nigerian banks generated N627.027 billion from their foreign subsidiaries, reflecting a 319% year-over-year growth
- This increase can be attributed to significant growth in gross earnings from these foreign subsidiaries.
Nigerian banks recorded an impressive performance in 2023, driven by policy shifts including increased interest rates to combat inflation and Naira devaluation, which led to foreign exchange gains and substantial growth in interest income.
For example, four Tier-1 banks; Access Holding, GTCO, UBA, and Zenith Bank, saw their gross earnings grow by 114.40% Year-on-Year, reaching N7.988 trillion in 2023.
This impressive growth contributed to a cumulative 233% YoY increase in pre-tax profit, totaling N2.892 trillion.
While Nigerian operations continue to account for a significant percentage of the group’s earnings, their cross-border expansion has also bolstered the bottom line, as reflected in the impressive growth in revenues and profits from these foreign subsidiaries.
A cursory review of the financial performance of the four banking groups with offshore subsidiaries highlights a significant rise in revenues and profits.
- United Bank for Africa (UBA) led the way with the most subsidiaries, followed by GTCO, Access, and Zenith.
- Nairametrics tracks these top banks with foreign subsidiaries, with emphasis on the countries in which they operate.
- However, Nairametrics could not track FBN Holding subsidiaries as it did not publish data on its subsidiaries. However, the bank reports its international subsidiaries which include African Subsidiaries and First Bank UK contributed 24.5% of profits.
In aggregate, the four banks generated a pre-tax profit of N627.027 billion from their foreign subsidiaries in 2023, representing a 329.61% YoY growth compared to N145.953 billion in 2022.
This overall growth recorded appears to be driven by an impressive growth in gross earnings and a marginal YoY growth in net impairment loss from their foreign subsidiaries.
In aggregate, gross earnings grew by 124% year-over-year, reaching N1.666 trillion, while net impairment loss grew by 9% YoY, reaching N189.75 billion.
Below is a compilation of profits announced by these foreign subsidiaries during the full year 2023, gathered from the audited financial statements of the banks:
Pre-Tax Profits of commercial banks
GTCO Plc- N130.664 billion
GTCO Plc reported a pre-tax profit of N130.664 billion. Data from the bank’s audited financial statements indicates that GTCO Plc, operating in eight countries including Ghana, Liberia, Kenya, Tanzania, Côte d’Ivoire, Gambia, Sierra Leone, and the UK, generated this pre-tax profit in 2023.
- This represents a significant increase of 309.89% compared to the N31.878 billion recorded in 2020.
- Additionally, it reflects a higher contribution of 21.44% compared to 14.89% in 2022.
- Except for GT Bank Tanzania, which recorded a pre-tax loss of N26 million, all other subsidiaries reported pre-tax profits, led by GT Bank Ghana with a pre-tax profit of N65.870 billion.
- This indicates that GTCO Plc’s impressive pre-tax profit of N130.664 billion from its foreign subsidiaries can be attributed to a significantly reduced impairment loss of N6.460 billion.
- This impairment loss is the lowest among the foreign subsidiaries of the four banking groups.
This probably indicates effective risk management and lower credit-related losses, possibly due to conservative lending practices.
Zenith Bank Plc- N131.486 billion
Zenith Bank Plc reported earnings of N131.486 billion from its four foreign subsidiaries, including Ghana, Sierra Leone, Gambia, and the UK, ranking third among its peers.
This could be due to its smaller number of foreign subsidiaries compared to other banks, or the strong performance of its Nigerian operations.
- In 2023, Zenith Bank reported the highest revenue from its Nigerian operation, amounting to N1.87 trillion, contributing about 87% to the group’s total revenue.
- Meanwhile, the four foreign subsidiaries tracked reported revenue of N131.486 billion.
- Zenith Bank Ghana led the subsidiaries with a pre-tax profit of N75.206 billion, a significant turnaround from the pre-tax loss of N27.776 billion recorded in 2022 due to a high impairment loss of over N58 billion that year.
- Similarly, Zenith Bank UK posted an impressive pre-tax profit of N49 billion, up from N21 billion in 2022.
- Despite the significant 82% decline in aggregate subsidiaries’ net impairment loss to N10.341 billion, Zenith Bank Nigeria’s impairment loss surged by 544% to N398.412 billion, resulting in the group’s net impairment loss of N409.616 billion, the highest among the four banks.
- Nevertheless, the group’s pre-tax profit remained the highest at N795.962 billion.
Despite ranking third in earnings from foreign subsidiaries, Zenith Bank’s impressive year-over-year growth in revenue from these subsidiaries (135%) suggests potential for expansion and growth in international markets.
Investors may see this growth as a positive sign for future profitability and market penetration in foreign regions.
Despite the impairment losses, Zenith Bank maintained its position with the highest pre-tax profit among the four banks.
UBA Plc – N165.697 billion
Data from the banks’ audited financial statements revealed that UBA, with a presence in 20 African countries, including Ghana, Liberia, Kenya, Uganda, Mali, Tanzania, Senegal, Guinea, Cote D’ Ivoire, Gabon, Benin, Sierra Leone, Burkina Faso, Chad, Congo Brazzaville, Mozambique, Cameroon, Congo DRC, Zambia and a branch in the United Kingdom, generated a pre-tax profit of N165.697 billion from these foreign subsidiaries in 2023.
Out of the 20 subsidiaries, 16 posted pre-tax profits, led by UBA Cameroon with N28.944 billion, followed by UBA Cote D’Ivoire with N25.856 billion. However, UBA Ghana, Kenya, Guinea, and Mali recorded pre-tax losses.
- Overall, the pre-tax profit growth marks a 69.40% increase from the N97.816 billion reported in 2022.
- Despite this growth, the contribution from foreign subsidiaries to the group’s profit declined to 19.6%, compared to the 40% contribution to pre-tax profit before accounting for the group adjustment.
- This implies that although the absolute profit from foreign operations rose, its growth rate did not match that of the group’s total profit, resulting in a reduced percentage contribution.
- This situation can be attributed to the sizable profit derived from UBA’s Nigerian operations.
- The substantial contribution of N673.011 billion from the Nigerian operation out of the group’s total pre-tax profit of N757.680 billion after accounting for group adjustments highlights the dominant role of the domestic market in UBA Plc’s overall profitability in 2023, which correlates with the decline in contributions from foreign subsidiaries.
- This can also be attributed to the high net impairment loss recorded by the Group. The Group reported a substantial 404% YoY growth in impairment loss from its foreign subsidiaries, reaching N155.599 billion.
- This amount constitutes about 82% of the aggregate net impairment losses of N189.754 billion incurred by the Four Banks from their foreign subsidiaries.
Despite this, UBA’s pre-tax profit remained significant at N757.680 billion, even after the group adjustment, ranking as the second best among the four banks under review.
Access Holding Plc – N199.180 billion
Access Holding Plc’s foreign operations generated N199.180 billion in net pre-tax profit in 2023 from 14 offshore subsidiaries tracked by Nairametrics.
This makes Access Holding Plc the group with the highest pre-tax profit from its foreign subsidiaries, which include operations in Ghana, the UK, Gambia, South Africa, Rwanda, R.D. Congo, Zambia, Sierra Leone, Guinea, Mozambique, Kenya, Botswana, Cameroon and Angola.
- This is despite the pre-tax losses sustained by its subsidiaries in South Africa, Mozambique, and Kenya.
- The impressive pre-tax profit growth from its UK and Ghana operations bolstered the over 945% year-over-year growth in 2023.
- Access Bank Ghana posted a pre-tax profit of N77.719 billion, rebounding from a pre-tax loss of N22.294 billion, while Access Bank UK posted N98.422 billion, the highest pre-tax profit from UK operations among the four banks.
- Overall, the impressive performance appears to be driven by Access Bank’s revenue growth and the decline in net impairment losses.
- Access Holding’s revenue of N2.595 trillion, the highest among the four groups in 2023, included N271.950 billion from the rest of Africa, while Access Bank UK contributed N135.860 billion. In total, its foreign subsidiaries contributed about 16% of the revenue.
In terms of net impairment loss, the group’s foreign subsidiaries’ impairment loss declined by 79% YoY to N16.8 billion, moderating the group’s overall impairment loss to N198 billion, the second best among the four groups.