Nigerian banks have begun releasing their Q1 2025 outcomes, and whereas many are nonetheless posting billions in revenue, the period of runaway earnings progress could also be drawing to a detailed.
For years now, Nigeria’s largest banks, popularly known as the FUGAZ, have normalized quarterly pre-tax income above N150 billion.
Nonetheless, early numbers from this quarter recommend that progress is starting to stall, and in some circumstances, reverse.
GTCO, one of many sector’s best banks, noticed its pre-tax revenue fall sharply by 41% to N300 billion. FirstHoldCo wasn’t spared both, recording a 20.2% drop.
Entry Holdings and Zenith Bank nonetheless posted modest growths of round 10%, however even that marks a steep drop from the triple-digit surges seen this time final 12 months. So, what modified?
The price of staying in enterprise is rising
A more in-depth take a look at the monetary statements tells a part of the story. Working bills are rising throughout the board, largely in response to spiraling inflation.
As the price of doing enterprise climbs, banks are spending extra on every part—from know-how to salaries. With larger steadiness sheets, their overheads are additionally scaling up.
As an example, FirstHoldCo spent over N19 billion on promoting and promotion—an enormous spike in comparison with final 12 months.
Access Bank reported N41 billion in IT and e-business bills, whereas Zenith Bank’s IT spend surged previous N21 billion. Personnel bills are additionally on the rise, as banks alter wages and broaden their workforce to assist progress.
Along with inflationary pressures, banks are additionally seeing spikes in statutory prices. The controversial AMCON levy, a decision fund payment, is taking an even bigger chew out of income.
Then there’s the sharp drop in international change revaluation positive factors—one other main issue now weighing on backside strains.
The foreign exchange windfall is drying up
During the last two years, Nigerian banks recorded huge positive factors from foreign exchange revaluation, due to a number of forex devaluations. However with the naira now displaying relative stability in 2025, these once-in-a-lifetime windfalls are truly fizzling out.
Take Zenith Bank. Its buying and selling positive factors dropped from N186.3 billion in Q1 2024 to simply N12.8 billion this quarter. Final 12 months, the bank remodeled N1 trillion in revaluation and buying and selling positive factors.
GTCO’s story is much more dramatic, with unrealized FX positive factors plunging from N331 billion to simply N1.5 billion.
This sharp drop was anticipated, however its impact on earnings is now clearly seen.
The EPS problem looms
There’s one other issue quietly at play: dilution from final 12 months’s capital raises. In 2024, Nigerian banks raised almost N2 trillion in contemporary fairness to fulfill recapitalization targets.
This implies extra shares in circulation—and due to this fact decrease earnings per share (EPS), even when complete revenue nonetheless grows.
EPS is essential for valuations and investor sentiment. To take care of or develop EPS at 2024 ranges, banks would wish to considerably scale up income—maybe double or triple present ranges.
That can be a tall order, particularly as banks are actually anticipated to develop earnings primarily by lending.
Whereas rates of interest stay excessive and risk-free devices like treasury payments are enticing, increasing mortgage books in a fragile financial system may enhance non-performing loans.
Luckily, most banks have constructed strong buffers by making provisions throughout the worthwhile years. However the dangers stay.
What to anticipate going ahead
Whereas extra Q1 outcomes are but to be launched, the early indicators level to a standard development: earnings progress is cooling off. This doesn’t imply banks are in hassle—it simply means traders should alter their expectations.
The Nigerian banking sector remains to be very worthwhile. However the days of bumper positive factors pushed by one-off FX revaluations, underpriced equities, and windfall buying and selling revenue could also be behind us.
For traders, it’s time to look at how banks reply: Will they double down on lending? Will prices spiral additional? Or will they discover new, extra sustainable paths to revenue?
The golden period of simple bank income could also be fading. What comes subsequent will demand higher technique—and much more persistence.
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