Downloadable Versions of Tier 1 Banks Report (PDF)

1. Executive Summary: Reassessing Tier 1 Banks: The New Class of 2023 - October 13, 2023
2. Full Report: Reassessing Tier 1 Banks: The New Class of 2023 - October 13, 2023
3. Rapporteur's Report - 2023 Tier1 Banking Report

Key Findings

Review of 2021 PBSI Methodology 

• Our Banking sector report last year emphasised the fact that the only statutory classification of banks given by the regulator (CBN) is with respect to the Systemically Important Banks (SIB) and Non-SIB classification and that while this met the needs of the regulator in ensuring a stable financial system, a SIB is not necessarily the same as a Tier 1 bank. 
• The PBSI queried industry-wide, historical data on the usual bank assessment metrics, namely Assets and Gross earnings growth, Capital Adequacy Ratio (CAR), Loans to Deposits Ratio (LDR), Cost to Income Ratio (CIR), Cost of Risk (CoR), Net Interest Margin (NIM), Non-Performing Loans Ratio (NPLR).
• The report also looked at new metrics like Digital Income to gross earnings ratio, NED to board ratio, and efficiency ratio, among others.
• The PBSI weighted and summed up the 2021 selected ratios for each quoted bank. 
• Banks with overall PBSI scores in the 50th percentile are regarded as Tier 1 banks, while those that do not make the cut-off are classified as Tier 11 banks.
• After weighing and summing the selected ratios as per the 2021 results, Access Bank, UBA, Stanbic IBTC Zenith Bank, GTB, & Fidelity Bank came up with scores in the 100th, 91st, 82nd, 73rd,64th, and 55th percentiles respectively.
• By implication, Access Bank came up with a score better than 100% of all other banks, while UBA outperformed 91% of other banks and in its own case, Fidelity Bank outperformed 55% of the industry.
• ETI, FBNH, Union Bank, Sterling Bank, and Wema Bank failed to make the 50th percentile cut and so fell in the Tier 2 category. 

The New Class of FYE 2022 and H1 2023

• As the industry evolves, income from digital sources has become larger; as such, digital income to gross earnings becomes more crucial as a determinant of long-term profitability. 
• Also, the Holdco-model shift of some banks, with bigger sizes, suggests bigger risks and complexity of management.
• The 2022 PBSI was revised this year to re-rank Nigerian Banks objectively into Tiers, and the ratios found to be statistically significant based on the current structure and relative size of banking in this edition are CAR, COR, Loan Assets, NPLR, CIR, NIM, Earnings Growth, Assets Growth, Earnings Diversity, and Board Governance.
• At the end of the analysis of their FY 2022 results, ACCESS, UBA, GTCO, STANBIC, and ZENITH Banks retained their position as Tier 1 banks having recorded scores in the 50th percentile, while FBNH's credible FY2022 performance saw the bank make a return to the fold.

• Using the H1 2023 Financial Statements, the PBS1 table shows Access, UBA, Zenith, GTCO, and FBNH maintained their strength as Tier 1 banks on the strength of their performance across the major assessment metrics, particularly E-banking, relative asset size, and risk management.
• Consequentially, Fidelity Bank dropped from Tier 1 banks with its FYE 2022 results and retained its drop in H1 2023. ETI also dropped from the list as Tier 1 with its FYE 2022 results but moved up into Tier 1 based on its H1 2023 results. Stanbic IBTC, on the other hand, made the list with its FYE 2022 but dropped from the list of Tier 1 banks in H1 2023.