Regulatory Alerts2025-12-09
NDIC Quarterly Vol 39 No 1&2 2024 – Financial Performance and Condition of Deposit Money Banks in the First and Second Quarter of 2024
In the first half of 2024, Nigerian Deposit Money Banks (DMBs) fortified their financial position, with total assets rising 8.62% to N143,324.67 billion and customer deposits growing by 10.48%, demonstrating increased funding and balance sheet expansion. The industry's asset quality improved markedly as the impaired credit ratio dropped to 3.90% (below the 5.0% prudential limit), alongside a significant 147 basis point increase in the average Capital Adequacy Ratio to 12.52%, reflecting enhanced resilience. Profitability also saw a substantial boost, with Profit Before Tax soaring by 43.71% to N1,514.90 billion, despite a 3.5% decrease in the Net Credit to Deposit ratio, indicating a shift towards greater liquidity and possibly reduced direct lending relative to deposits.
NDIC QUARTERLY JOURNAL MAR/JUN 2024 VOLUME 39, NUMBER 1 & 2
Financial Condition and Performance of Deposit Money Banks in the First and Second Quarter, 2024
3.0 Introduction
The performance of Deposit Money Banks (DMBs) remained resilient in the first half of 2024 despite the elevated risk that arose due to a volatile foreign exchange market, which largely affected economic activities. This section provides an assessment on the financial condition and performance of DMBs for the first and second quarter of 2024.
3.1 Structure of Assets and Liabilities
The Total Assets of the 35 DMBs stood at N143,324.67 billion as at June 30, 2024, an increase of N11,374.77 billion (8.62 per cent) from N131,949.90 billion as at March 31, 2024. The growth resulted from significant increase in balances with Banks & Central Bank, Loans & Advances to Customers, and Financial Assets held at Fair Value through Other Comprehensive Income (FVOCI), by 10.84 per cent, 5.25 per cent and 28.11 per cent, respectively (See Table 3.1).
Other components of the DMB's balance sheet that contributed to the growth of Total Assets included Financial Assets held at Amortised Cost, Financial Assets Held for Trading and Loans & Advances to Banks which increased by N2,071.72 billion (17.91 per cent), N1,704.28 billion (24.23 per cent) and N1,077.62 billion (54.19 per cent), from N11,565.69 billion, N7,034.96 billion and N1,988.76 billion as at March 31, 2024, to N13,637.40 billion, N8,739.24 billion and N3,066.38 billion as at June 30, 2024, respectively.
The growth in Total Liabilities was largely funded by Deposit from Customers, Shareholders' Funds (SHF) and Debt Instrument. Deposit from Customers increased by N8,380.13 billion (10.48 per cent) from N79,973.14 billion as at end March, 2024 to N88,353.27 billion as at end June 2024, constituting the largest share of industry liabilities at 61.65 per cent. Sharehold’rs' Fund and Debt Instrument recorded a growth of N1,609.88 billion (21.39 per cent) and N1,489.57 billion (32.21 per cent), from N7,526.82 billion and N4,623.94 billion as at end March 2024, to N9,136.70 billion and N6,113.51 billion as at end June 2024, respectively.
The DMBs' borrowings also increased by N962.29 billion (9.86 per cent), from N9,758.83 billion as at March 31, 2024, to N10,721.12 billion as at June 30, 2024. Furthermore, Deposit from Banks recorded a growth of N188.49 billion (1.91 per cent), from N9,881.09 billion as at March 31, 2024 to N10,069.58 billion as at June 30, 2024, as depicted in Table 3.1.
Table 3.1: Structure of D'Bs' Assets and Liabilities for the First and Second Quarter, 2023
| PARAMETER | As at June 30, 2024 (N' Billion) | Per cent of TOTAL | As at March 31, 2024 (N' Billion) | Per cent of TOTAL | Changes btw Q1&Q2 2024 (N' Billion) | Per cent of TOTAL |
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash Balances | 1,043.85 | 0.73 | 842.11 | 0.64 | 201.74 | 23.96 |
| Balances with Banks & Central Bank | 43,314.75 | 30.22 | 39,078.78 | 29.62 | 4,235.97 | 10.84 |
| Loans & Advances to Banks | 3,066.38 | 2.14 | 1,988.76 | 1.51 | 1,077.62 | 54.19 |
| Loans & Advances to Customers | 48,731.82 | 34.00 | 46,302.73 | 35.09 | 2,429.09 | 5.25 |
| Financial Assets Held for Trading | 8,739.24 | 6.10 | 7,034.96 | 5.33 | 1,704.28 | 24.23 |
| Financial Assets held as Fair Value through Other Comprehensive Income (FVOCI) | 10,977.11 | 7.66 | 8,568.78 | 6.49 | 2,408.34 | 28.11 |
| Financial Assets held as Amortised Cost | 13,637.40 | 9.52 | 11,565.69 | 8.77 | 2,071.72 | 17.91 |
| Assets Pledged as Collateral | 4,516.57 | 3.15 | 5,435.89 | 4.12 | -919.32 | -16.91 |
| Investment in Subsidiaries & Associates | 1,078.31 | 0.75 | 1,135.55 | 0.86 | -57.24 | -5.040 |
| Property Plant and Equipment | 1,799.72 | 1.26 | 1,784.90 | 1.35 | 14.81 | 0.83 |
| Other Assets | 6,301.56 | 4.40 | 8,104.60 | 6.14 | 1,803.04 | -22.25 |
| Asset Classified as Held for Sale & Discontinued Operations | 117.97 | 0.08 | 107.16 | 0.08 | 10.81 | 10.08 |
| TOTAL ASSETS | 143,324.67 | 100.00 | 131,949.90 | 100.00 | 11,374.77 | 8.62 |
| LIABILITIES | ||||||
| Deposit from Banks | 10,069.58 | 7.03 | 9,881.09 | 7.49 | 188.49 | 1.91 |
| Deposit from Customers | 88,353.27 | 61.65 | 79,973.14 | 60.61 | 8,380.13 | 10.48 |
| Financial Liabilities Held for Trading | 348.96 | 0.24 | 1,406.26 | 1.07 | -1,057.30 | -75.19 |
| Borrowings | 10,721.12 | 7.48 | 9,758.83 | 7.40 | 962.29 | 9.86 |
| Debt Instrument | 6,113.51 | 4.27 | 4,623.94 | 3.50 | 1,489.57 | 32.21 |
| Other Liabilities | 18,581.53 | 12.96 | 18,779.82 | 14.23 | -198.29 | -1.06 |
| TOTAL LIABILITIES | 134,187.97 | 93.63 | 124,423.07 | 94.30 | 9,764.90 | 7.85 |
| Sharehold'rs' Fund | 9,136.70 | 6.37 | 7,526.82 | 5.70 | 1,609.88 | 21.39 |
| TOTAL LIABILITIES & SHF | 143,324.67 | 100.00 | 131,949.90 | 100.00 | 11,374.77 | 8.62 |
Source: NDIC
3.2 Financial Performance Indicators of DMBS
3.2.1 Capital Adequacy
The Average Capital Adequacy Ratio (CAR) of DMBs improved by 147 basis points from 11.05 per cent as at end March, 2024 to 12.52 per cent as at end June, 2024. This improvement derived from significant increase in the Total Qualifying Capital (TQC) by N1,148.39 billion (18.51 per cent) from N6,203.38 billion as at end March, 2024 to N7,351.77 billion as at end June, 2024.
The increase in the TQC was largely driven by the Tier 1 capital (core capital) of most banks, which grew by N1,205.99 billion (23.96 per cent), from N5,032.55 billion as at end March, 2024 to N6,238.53 billion as at end June, 2024, as shown in Table 3.2.
Table 3.2: DMBs' Capital Adequacy Position
| Capital Adequacy Performance Indicators (%) | As at June 30, 2024 | As at March 31, 2024 |
|---|---|---|
| Capital to Risk-Weighted Assets Ratio | 12.52 | 11.05 |
| Capital to Total Assets Ratio | 5.13 | 4.70 |
| Adjusted Capital Ratio | 11.58 | 9.91 |
| Parameters (N' Billion) | ||
| Total Qualifying Capital | 7,351.77 | 6,203.38 |
| Total Risk-Weighted Assets | 58,704.47 | 56,144.51 |
Source: NDIC
3.2.2 Asset Quality
The ratio of Impaired Credit to Total Credit declined from 5.05 per cent as at end March, 2024 to 3.90 per cent as at end June, 2024, below the prudential limit of 5.0 per cent. The decline in this ratio signaled significant improvement in the asset quality. While Total Credit increased by N2,532.99 billion (4.72 per cent) to N56,219.48 billion as at end of second quarter, 2024, from N53,686.49 billion as at end of first quarter, 2024, impaired credits fell by N517.94 billion (23.61 per cent), to N2.19 trillion as at June 30, 2024, from N2.71 trillion as at March 31, 2024. Furthermore, the share of Total Earning Assets to Total Assets slightly increased by 145 basis points from 56.02 per cent as at end March, 2024 to 57.47 per cent as at end June, 2024, as shown in Table 3.3.
Table 3.3: Asset Quality
| Performance Indicators (%) | As at June 30, 2024 | As at March 31, 2024 |
|---|---|---|
| Impaired Credits to Total Credits | 3.90 | 5.05 |
| Total Earning Assets to Total Assets | 57.47 | 56.02 |
| Total Impairment to Impaired Credits | 82.06 | 82.80 |
| Impaired Credits to Shareholders' Fund | 31.16 | 46.14 |
| Parameters (N' Billion) | ||
| Total Assets | 143,324.67 | 131,949.90 |
| Total Earning Assets | 82,362.66 | 73,912.01 |
| Total Credits | 56,219.48 | 53,686.49 |
| Impaired Credits | 2,194.17 | 2,712.11 |
Source: NDIC (2023)
3.3 Sectoral Allocation of Credits
A review of sectoral allocation of credit of the DMBs revealed that, Oil & Gas sector as well as the Manufacturing sector received the highest shares of credit, recording 29.09 per cent and 17.41 per cent as at end March 2024, to 29.77 per cent and 16.33 per cent as at end June, 2024, respectively. However, Arts, Entertainment & Recreation, and Activities of Extraterritorial had the least allocation for the period under review.
On the other hand, Manufacturing sector accounted for N9,178.26 billion (16.33 per cent) of the DMBs total credit as at end June, 2024. The sector reported a decrease of N168.37 billion (1.08 per cent) when compared with N9,346.63 billion (17.41 per cent) as at end March, 2024, as depicted in Table 3.4.
Table 3.4: Structure of Credit Allocation among Sectors (%)
| S/N | SECTORS | As at June 30, 2024 | As at March 31, 2024 |
|---|---|---|---|
| 1 | Oil and Gas | 29.77 | 29.09 |
| 2 | Manufacturing | 16.33 | 17.41 |
| 3 | General | 9.83 | 8.13 |
| 4 | Finance and Insurance | 9.24 | 8.53 |
| 5 | General Commerce | 6.78 | 8.21 |
| 6 | Government | 5.25 | 5.13 |
| 7 | Agriculture | 4.46 | 4.95 |
| 8 | Construction | 3.99 | 4.05 |
| 9 | Power and Energy | 3.04 | 3.14 |
| 10 | Information And Communication | 2.93 | 3.32 |
| 11 | Transportation And Storage | 2.55 | 2.63 |
| 12 | Real Estate | 1.89 | 1.81 |
| 13 | Capital Market | 1.72 | 1.36 |
| 14 | Professional, Scientific And Technical Activities | 0.72 | 0.67 |
| 15 | Public Utilities | 0.53 | 0.50 |
| 16 | Human Health And Social Work Activities | 0.28 | 0.34 |
| 17 | Water Supply; Sewerage, Waste Management And Remediation Activities | 0.26 | 0.24 |
| 18 | Education | 0.21 | 0.19 |
| 19 | Administrative And Support Service Activities | 0.12 | 0.17 |
| 20 | Mining And Quarrying | 0.09 | 0.08 |
| 21 | Arts, Entertainment And Recreation | 0.02 | 0.05 |
| 22 | Activities Of Extraterritorial Organizations And Bodies | 0.00 | 0.00 |
Source: NDIC
3.4 Earnings and Profitability
The DMBs' total income of N4,848.50 billion as at June 30, 2024, increased by N662.77 billion (15.83 per cent), from N4,185.73 billion as at March 31, 2024. This was majorly due to the growth in Total Operating Income by 35.69 per cent, from N2,258.82 billion as at March 31, 2024 to N3,032.87 billion as at June 30, 2024. This was reflected in an increase in interest income of N590.34 billion (21.88 per cent).
On the other hand, Total Expenses increased at a lower rate of N202.02 billion (6.45 per cent), from N3,131.57 billion as at March 31, 2024 to N3,333.60 billion as at June 30, 2024. Increase in Total Expense was attributed to an increase in Total Operating Expenses by N352.25 billion (28.71 per cent), from N1,226.86 billion as at end March 2024 to N1,579.11 billion as at end June, 2024. This resulted in a Profit-Before-Tax (PBT) of N1,514.90 billion as at June 30, 2024. The PBT grew by N460.75 billion (43.71 per cent) when compared with N1,054.15 billion as at March 31, 2024.
In addition, the industry's Return on Assets, Return on Equity, Net Interest Margin, and Yield on Earning Assets recorded improvements as at end of second quarter, 2024, as presented in Table 3.5.
Table 3.5: Earning and Profitability Performance of the Banking Industry
| Performance Indicators | As at June 30, 2024 | As at March 31, 2024 | Changes Btw Q1 & Q2 2024 (N) | Changes Btw Q1 & Q2 2024 (%) |
|---|---|---|---|---|
| Interest Income (N' Billion) | 3,288.33 | 2,697.99 | 590.34 | 21.88 |
| Interest Expense (N' Billion) | 1,633.93 | 1,382.67 | 251.25 | 18.17 |
| Net Interest income (N' Billion) | 1,654.40 | 1,315.32 | 339.08 | 25.78 |
| Recoveries (N' Billion) | 53.50 | 15.34 | 38.16 | 248.68 |
| Operating Income (N' Billion) | 3,032.87 | 2,258.82 | 814.00 | 35.69 |
| Operating Expenses (N' Billion) | 1,579.11 | 1,226.86 | 352.25 | 28.71 |
| Total Income (N' Billion) | 4,848.50 | 4,185.73 | 662.77 | 15.83 |
| Total Expense (N' Billion) | 3,333.60 | 3,131.57 | 202.02 | 6.45 |
| Profit before Tax (N' Billion) | 1,514.90 | 1,054.15 | 460.75 | 43.71 |
| Parameters in (%) | ||||
| Return on Assets (%) | 3.66 | 3.03 | ||
| Return on Equity (%) | 61.56 | 55.54 | ||
| Net Interest Margin (%) | 7.52 | 6.73 | ||
| Yield on Earning Assets (%) | 15.16 | 13.80 |
Source: NDIC
3.5 Liquidity Profile
The Average Liquidity Ratio (ALR) of the DMBs increased by 628 basis point from 43.79 per cent as at March 31, 2024 to 50.07 per cent as at June 30, 2024. The growth in ALR was attributed to an increase in the Total Specified Liquid Assets by N7,361. 92 billion (35.97 per cent) which was driven by the increases in volume of CBN Registered Certificates, FGN Bonds and Net Inter-Bank Placements with other Banks during the period. The Net Credit to Deposit Ratio, which measures banks' lending activities, decreased slightly from 67.13 per cent as at end March, 2024 to 63.63 per cent as at end June, 2024, as shown in Table 3.6.
Table 3.6: DMBs Liquidity Profile
| Performance Indicators (%) | As at June 30, 2024 | As at March 31, 2024 |
|---|---|---|
| Average Liquidity Ratio | 50.07 | 43.79 |
| Net Credit to Deposit Ratio | 63.63 | 67.13 |
| Net Inter-Bank Takings to Deposit Ratio | 0.00 | 0.90 |
Source: NDIC
3.6 Conclusion
The performance of banking industry improved in the period under review, with Capital Adequacy Ratio above the prudential threshold for 25 out of 35 DMBs. The Total Assets of the banking industry increased by 8.62 per cent from N131,949.90 billion as at March 31, 2024, to N143,324.67 billion as at June 30, 2024; while Deposit from Customers also appreciated by 10.48 per cent during the same period. There was also significant improvement in the Asset Quality, and Earnings & Profitability indicators in the period under review. However, a decrease of 3.5 per cent was recorded on Net Credit to Deposit ratio as at end June, 2024.