FUGAZ banks is the acronym for Nigeria Tier 1 lenders, they are the biggest financial institutions in the country and they control 76% of Total Deposit and 61% of total Loans and Advances in the banking industry in Nigeria as at Q2 2019. They are FBN Holding (FirstBank), United Bank for Africa (UBA), Guarantee Trust Bank (GTB), Access Bank and Zenith Bank.
These 5 lenders have dominated the banking space for a while and has remained the most visible financial institution across the country. Although there was a recent offset in their balance sheet size that saw Access Bank moving from the 4thposition among the tier 1 lenders to the top with its recent acquisition of Diamond Bank. The bottom lines of the banks have maintained about the same trend with FUGAZ Banks increasing profits to the admiration of their stakeholders.
A review of how the 5 lenders increased their Post Tax profit for Q3 2019 by 14.4% year-on-year (YoY) to N521.6 billion from N455.9 billion in Q3 2018 shows about the same strategic trend across the 5 banks.
Fees Income – This income line appears to be the new toast for FUGAZ Banks at least for now (The recent CBN policy on lending to real sector may change the narrative soon). All the 5 banks grew their Fee and Commission Income over the figures for same period in 2018 by considerable margins.
Access Bank expectedly (Because of its increased size) had the highest growth of 49% in Fee Income while Zenith Bank had the least growth of 19%. FBN, UBA and GTB had 22%, 25% and 23% growth in Fee and Commission Income YoY respectively.
Interest Income – Interest Income seems to be dwindling in the income lines of some of the FUGAZ Banks (Again, the new CBN lending policy of 65% LDR may change this soon). Only Access Bank (again expectedly) grew its Interest income by double digit. The Banks 71% growth count be attributed to its new size.
UBA and GTB also grew their Interest Income line although by single digit of 5% and 1% respectively. FBN and Zenith has negative growth of 5% and 6% respectively in Interest Income between Q3 2018 and Q3 2019.
Operating Expenses (OPEX) – This Expenses line posses a major treat especially to the legacy bank like FBN and the biggest bank by Asset, Access Bank as the two banks had the largest growth in operating expenses. Again Access (expectedly) had the largest percentage increase in OPEX with a growth of 48%.
FBN increased its OPEX by 18% while UBA grew by 8%. GTB and Zenith are the only 2 banks that were able to reduce their OPEX and by 7.1% and 6.6% respectively.
Loan Loss Expense – This expense line has been a major concern to industry watchers and stakeholder of the oldest financial franchise in the country, FBN. But the bank getting out of it now and gradually returning to sound profitability. FBN was able to reduce it bad loan provisioning by 63% YoY. UBA also reduced its Loan Loss Expense by 37%. Although its provisioning amount is in single digit (billion).
GTB increased it provisioning by 65% although less than N3 billion was provided for Lost Loans in Q3 2019. Access Bank and Zenith bank also increased the amount provided for Loan Loss by 26% and 28% respectively.