- Shareholders to get N548.477bn dividends
As the first quarter of the year draws to a close, financial institutions and other blue-chip firms listed on the Nigerian Exchange Limited are in a hurry to woo investors with their reward potentials. In this report, FESTUS OKOROMADU, reviews the dividend proposition of three tier 1 banks who released their results to the market last week.
Equities investors who take pride in staking their investments in banking stocks for the long-term basis are in for bumper harvest as signified by the proposition of bountiful dividend payout by these financial institutions.
Last week, three tier 1 banks listed on the Nigerian Exchange Limited, namely, Guaranty Trust Holding Company Plc (GTCO), Zenith Bank Plc and United Bank for Africa released the financial results for the year 2024, announcing a total sum of N548, 477 billion as proposed dividends for the year. The amount is more than double the N296.72 billion distributed as dividend in 2023.
Topping the chart is GTCO. The bank is proposing a total dividend payout of N236.2 billion to all shareholders numbering 29,431,179,224 based on the declaration of N8.03 per share.
The group had distributed a total of N94.18 billion, translating to N3.20 per share in the corresponding period of 2023.
Further analysis shows that with the share price of the bank at N64.25 per share at close of trading on Thursday, March 27, 2025 the stock’s dividend yield amounted to 10.9 percent, implying that it will take an investor about 11 years to recoup capital invested if purchased at the stated price.
The duo of UBA and Zenith Bank are offering to distribute N5.00 per share as dividend to shareholders for the 2024 financial year.
However, UBA seem to be more benevolent this year as the board is proposing approximately N170.997 billion payout as against N95.8 billion distributed in 2023 which translated to N2.80 per share. Interestingly, it has a total of 34,199,421,366 ordinary shares in circulation at the close of its registrar for the 2024 financial year.
On the other hand, Zenith Bank with 28,256,000,000 ordinary shares in circulation, is offering to distribute N141.28 billion as dividend for the 2024 financial translating to N5.00 per share. This is against the total sum of N106.74 billion distributed as dividend in 2023 at N4.00 per share.
Facts behind huge dividends proposal
There is no gainsaying that the financial sector is a key benefactor of the current government’s policies as their profits for the year under review indicate. For instance, the duo of GTCO and Zenith Bank reported net profit of over N1 trillion.
GTCO
The bank reported a net profit of N1.02 trillion for the 2024 financial year, almost doubling the N539.65 billion posted in the corresponding period of 2023. The group’s performance was driven by the sturdy growth in both interest and non-interest income lines.
Detailed analysis shows that interest income grew by 143.6 percent year-on-year (Y-o-Y) to N1.34 trillion, driven by higher income from key contributory lines.
“The UBA Group reported a net profit of N766.57 billion as against N607.70 billion posted in the 2023 period. The performance is underpinned by the robust growth in core income which helped to offset decline in non-core income”
In nominal terms, the group generated higher revenue from investment securities that rose by 228.8 percent Y-o-Y to N599.32 billion, while loans and advances to customers grew by 75.2 percent Y-o-Y to N509.25 billion. Placements with other banks increased by 242.5 percent Y-o-Y to N226.83 billion, which was sufficient to offset the decline in income from loans and advances to banks that declined by 44.7 percent Y-o-Y.
Increase in funded income was driven by the combined impact of elevated rates in the fixed income market and increases in the HoldCo’s earning assets which grew by 59.9 percent Y-o-Y to N11.61 trillion.
Consequently, earnings yield increased significantly by 397 basis points to 11.6 percent.
However, non-performing loan ratio increased to 4.9 percent slightly above 4.2 percent reported in 2023, primarily due to the exchange rate impact on the group’s FCY-denominated loans.
Elsewhere, interest expenses surged by 148.3 percent Y-o-Y to N283.22 billion, primarily driven by the elevated interest rate in the environment, which led to increased funding costs.
Accordingly, the Holdco’s interest cost on customers’ deposit holdings rose by 114.5 percent Y-o-Y to N220.47 billion. At the same time, borrowing costs grew by 543.5 percent Y-o-Y to N47.34 billion.
Consequently, the net interest income rose by 142.4 percent Y-o-Y to N1.59 trillion.
Ultimately, the net interest income settled 176.2 percent Y-o-Y higher at N921.92 billion, following an increase in loan impairment charges to 32.7 percent Y-o-Y to N136.66 billion.
Non-interest income (NII) grew by 42.1 percent Y-o-Y to N747.36 billion, spurred primarily by the fair value gains on financial instruments up by 16.7 percent Y-o-Y to N515.55 billion.
Aside from the fair value gains, the rise in the income generated from net fees and commission rose by 73.4 Percent Y-o-Y to N189.71 billion, while FX trading which increased by 31.1 percent Y-o-Y to N76.83 billion further supported the income line. The expansion in NII, alongside the growth in net interest income, led to a 94.2 percent Y-o-Y increase in operating income to N1.67 trillion.
During the period under review, GTCO’s operating expenses grew by 60.9 percent Y-o-Y to N403.03 billion, with pressure stemming from personnel expenses, up by 89.4 percent to N85.40 billion, technological costs rose by 48.4 percent Y-o-Y to N88.04 billion, and AMCON levy increased by 34.2 percent Y-o-Y to N36.66 billion.
Overall, profit before tax advanced by 107.8 percent Y-o-Y to N1.27 trillion, while profit after tax grew by 88.6 percent Y-o-Y to N1.02 trillion, after accounting for the income tax expense of N248.44 billion – Windfall tax of N51.25 billion.
Zenith Bank Plc
Like GTCO, Zenith Bank’s net profit surpassed the N1 trillion mark, equally driven by strong showing from both the interest and non-interest income portfolio.
The posted a robust interest income growth of 137.7 percent Y-o-Y to N2.72 trillion, supported by elevated interest rates in 2024 and growth in the group’s earning assets up by 58.0 percent Y-o-Y to N23.21 trillion.
The bank’s foreign currency-denominated loans increased by 60.3 percent Y-o-Y to N5.78 trillion, primarily due to the steep devaluation of the naira, which increased the foreign currency portion of total loans to 58.0 percent compared with 55.0 percent in 2023.
Passing through the contributory lines, the bank generated higher income from loans and advances to customers up by 125.9 percent Y-o-Y to N1.52 trillion, investment securities grew by 165.6 percent Y-o-Y to N1.04 trillion, while loans and advances to banks increased by 102.0 percent Y-o-Y to N165.32 billion.
As a result, the group’s earnings yield increased to 11.7 percent as against 7.8 percent in 2023. Zenith Bank’s asset quality also improved, with a non-performing loan (NPL) print of 3.1 percent compared with 4.4 percent in 2023.
The bank had its own fair share from the elevated interest rate environment which led to higher funding costs for the bank, as interest expense increased by 143.0 percent Y-o-Y to N992.47 billion. Precisely, ZENITHBANK incurred higher costs on customer deposits as it rose by 102.8 percent Y-o-Y to N622.01 billion.
Likewise, borrowing costs rose by 270.5 percent Y-o-Y to N367.40 billion, following the rise in the bank’s interest-bearing borrowings which advanced by 22.2 percent to N2.05 trillion. Accordingly, the bank’s net Interest income surged by 227.7 percent Y-o-Y to N1.07 trillion, after accounting for the higher loan impairment charges by 60.8 percent Y-o-Y.
Further in, the bank reported a 19.7 percent Y-o-Y increase in non-interest income to N1.10 trillion, as the higher gains from trading, up by 94.0 percent Y-o-Y to N1.10 trillion, while net fees and commission income rose by 89.3 percent Y-o-Y to N206.87 billion to outstrip the foreign exchange (FX) revaluation loss of N178.02 billion recorded in the period. Thus, the bank’s operating income grew by 74.3 percent Y-o-Y to N2.17 trillion.
Operating expenses increased by 87.6 percent Y-o-Y to N843.35 billion, following the higher costs incurred on personnel expenses which rose by 64.1 percent Y-o-Y to N204.17 billion, fuel and maintenance rose by 145.1 percent Y-o-Y to N100.90 billion, and regulatory fees – AMCON levy increased by 228.7 percent Y-o-Y to N92.20 billion while deposit insurance premium grew by 98.4 percent Y-o-Y to N55.66 billion. Given that OPEX grew faster than operating income, the bank’s operational efficiency declined as the cost-to-income ratio settled at 38.9 percent as against 36.1 percent in 2023.
“Looking ahead to 2025, we expect continued positive momentum underpinned by improved credit creation. Although the stability of the naira may limit earnings growth, we expect the group’s strong operational efficiency to continue to support earnings”
Eventually, the bank’s profit before tax expanded by 66.7 percent Y-o-Y to N1.33 trillion. Following the one-off levy on FX revaluation gains, the bank incurred a windfall tax of N63.31 billion, bringing total tax expense for 2024 to N293.96 billion. Consequently, PAT grew by 52.6 percent to Y-o-Y to N1.03 trillion.
UBA
The UBA Group reported a net profit of N766.57 billion as against N607.70 billion posted in the 2023 period. The performance is underpinned by the robust growth in core income which helped to offset decline in non-core income.
The group’s funded income recorded a marked growth of 120.4 percent Y-o-Y to N2.37 trillion, driven by higher income recorded across all contributory lines. Precisely, the significant hike in the monetary policy rate of 850 basis points (bps) and 55.4 percent growth in the group’s interest-earning assets pegged it at N25.47 trillion, resulted in higher income from investment securities which grew 137.0 percent Y-o-Y to N1.20 trillion, loans and advances to customers up by 98.9 percent Y-o-Y to N779.69 billion, loans and advances to banks rose by 127.2 percent Y-o-Y to N241.65 billion, and placement with banks increased by 109.4 percent Y-o-Y to N146.08 billion.
Expectedly, the elevated interest rate environment also reflected in UBA’s interest expense, increasing by 128.2 percent Y-o-Y to N839.25 billion.
Analysing by segments, the group incurred higher costs on customers’ deposits up by 85.2 percent Y-o-Y to N456.61 billion, banks’ deposits soared by 277.8 percent Y-o-Y to N196.63 billion, borrowings rose by 169.9 percent Y-o-Y to N180.56 billion, and lease liabilities rose by 131.0 percent Y-o-Y to N5.45 billion.
Down the line, non-interest income declined by 33.9 percent Y-o-Y to N582.85 billion as the fair value loss on derivatives at N342.21 billion undermined the higher income from net fees and commission which rose by 87.8 percent Y-o-Y to N355.00 billion as FX revaluation advanced by 1,002.6 percent Y-o-Y to N293.09 billion, FX trading increased by 19.8 percent Y-o-Y to N134.31 billion and investment securities grew by 52.7 percent Y-o-Y to N96.75 billion. All told, operating income expanded by 34.5 percent Y-o-Y to N1.86 trillion.
Operating expenses grew by 69.0 percent Y-o-Y to N1.06 trillion, mirroring the inflationary pressures in 2024. Precisely, the group incurred higher costs on personnel expenses which increased by 72.1 percent to N314.66 billion, fuels, repairs and maintenance rose by 70.9 percent Y-o-Y to N101.28 billion, while contract services went up by 70.1 percent Y-o-Y to N111.88 billion, AMCON levy up by 78.2 percent Y-o-Y to N71.91 billion, and NDIC premium rose by 97.3 percent Y-o-Y to N47.56 billion. Nonetheless, given that the group’s operating expenses grew faster than operating income, UBA’s operational efficiency deteriorated as the cost-to-income ratio settled at 56.8 percent as against 45.2 percent in the prior year.
Overall, profitability grew stronger as the group’s profit before tax rose by 6.1 percent Y-o-Y to N803.73 billion. Following the bill passed by the National Assembly in 2024, imposing a one-off 70.0 percent levy on realised FX profits for 2023 and 2024, UBA recorded a windfall tax of N57.91 billion – N24.82 billion for 2023 and N33.09 billion for 2024.
Nonetheless, despite the windfall tax and current tax expense of N161.17 billion, tax credits of N181.92 billion provided relief, bringing income tax for 2024 to N37.16 billion. As a result, UBA’s profit after tax expanded by 26.1 percent to N766.57 billion.
Expert’s perceptions
Commenting on the financials, the Chief Executive Officer of Globalview Capital Limited, Aruna Kebira, noted that GTCO’s performance was impressive, with financial indicators surpassing peers.
“First, the group continues to seal the title of the most efficient lender, with a CIR of 24.2%. Additionally, the group now holds the industry’s highest buffers relative to risky assets, with a CAR of 39.3%. Furthermore, following the sizable dividend proposed, GTCO boasts the highest dividend yield of 10.9%.
“Looking ahead to 2025, we expect continued positive momentum underpinned by improved credit creation. Although the stability of the naira may limit earnings growth, we expect the group’s strong operational efficiency to continue to support earnings.”
On Zenith Bank’s performance, he said the bank demonstrated resilience across all financial indicators.
“It is important to note that the bank effectively repriced loans in line with the current interest rate environment, resulting in a robust top line.
“Additionally, despite the increased risk in 2024, the bank’s asset quality improved, and robust risk management policies resulted in an improved Capital Adequacy Ratio (2024FY: 25.6% | 2023FY: 21.7%). Looking ahead to 2025, we anticipate increased credit creation to support growth in interest income amid expected rate cuts.
“However, due to our expectations of a less volatile naira in 2025, we anticipate limited earnings growth, as most of the bank’s non-interest income stems from FX gains.”
UBA’s performance, in his view, was impressive and in line with financial expert’s projections.
“The group reported an EPS of N21.73/s, slightly outperforming our estimate of N21.64/s.
“Looking ahead to 2025 financial year, although market dynamics point to a reduction in the policy rate, we expect core income to remain robust, underpinned by the stellar growth in the group’s earning assets,” he stated.