With most listed banks expected to publish full-year 2022 earnings over the coming weeks, we look at the major themes that shaped banks' financial performance during 2022 and delineate our expectations for FY 2022 results before presenting our views on the banking industry for the year 2023. Note two banks, Stanbic IBTC and Zenith Bank, have already reported FY 2022 results.

The year 2022 saw the Central Bank of Nigeria (CBN) take a hawkish monetary stance, hiking the benchmark policy rate as well as the Cash Reserve Requirement (CRR). This, together with a rise in government borrowing, drove lending yields up and consequently banks’ net interest margins (NIM). We expect modest FY 2022E performance upside for most of the banks featured here, driven by improved asset yields, although capped by ongoing CRR debits. We expect earnings support from strong growth in Non-Interest Revenue (NIR).

In 2023 we expect the Nigerian banking industry to face pressures stemming from stringent regulations, high inflation, continuous dollar shortages and even asset quality issues. Nonetheless, we expect modest growth in earnings from the banks featured, driven by rising interest rates, a strong contribution from non-interest revenue derived from FX revaluation gains, growth in non-bank businesses and digital banking.

We believe Nigerian banks currently trade at significant discounts to peers and thus offer an attractive entry point with a further case made by attractive dividend yields. We have bank-specific sections, three-year financial forecasts and recommendations for six listed banks: Zenith Bank; Guaranty Trust Holding Company (GTCO); Access Holdings; FBN Holdings (FBNH); UBA; and Stanbic IBTC.

On our BUY list we feature Zenith Bank; GTCO; Access Holdings; UBA; and Stanbic IBTC. On our HOLD list we feature FBNH.

This report covers actual 2022FY figures for Stanbic IBTC and Zenith Bank.

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