Profit ratio

Nigerian banks’ operating cost to total revenue ratio rises to 77.3% — CBN

The Central Bank of Nigeria (CBN) Banking System Stability Review Report showed that in general the banking system remained safe, sound and resilient, but the ratio of operating costs to income total operating revenue fell from 75.5 percent in March 2022 to 77.3 percent in April 2022.

The cost-to-revenue ratio is a key financial metric that shows a company’s costs as a proportion of its revenue. This helps give investors a clear view of how efficiently a bank is run. Specifically, it shows the amount of input the bank needs to generate N1 of output.

In particular, the lower this ratio, the more the bank will be profitable, productive and competitive.

Indeed, in the first quarter of the year, the cost of diesel increased from N225 to over N750, an increase of over 230%.

The impact on business operations has forced some banks to adopt new survival measures.

Strategies range from streamlining, lowering wages to closing some agencies considered “loss centers” to banning or outsourcing dispatch operations, for those who have not done so. .

These developments come in the wake of relentless national grid meltdowns that leave the country in the dark, forcing organizations to rely heavily on diesel for their operations.

Analysis of the first quarter (Q1) 2022 financial results of selected banks in terms of the lowest cost to income ratio shows that First Bank of Nigeria took the first position with (-12.48%).

The second position went to FCMB at (-6.83%) while Wema Bank at -5.5% took the third position. Others are; fourth position – Stanbic IBTC (-5.4 percent); fifth place – Sterling Bank (-2.1%)

Records show First Bank experienced the largest decline in its cost-to-income ratio in the first quarter of 2022, falling from 79.5% recorded in the first quarter of 2021 to 67.03% during the reporting period.

FCMB also saw its number drop to 72.69%. However, GT Bank currently has the lowest cost-to-income ratio of 42.42% in the first quarter of 2022.

In terms of return on equity (ROAE), Access Bank’s ROAE compares to that of Zenith Bank at 19.22%; United Bank for Africa (UBA), 20.36%; Guaranty Trust Holding Company (GTCO), 19.29%; Wema Bank, 15.96%; Stanbic IBTC Holdings, 15.60%; First City Monument Bank (FCMB), 8.39% and Fidelity Bank, 13.29%.

A higher ROAE means that Access Bank returned its income as equity because it earned more money from non-interest income.

Return on equity, according to experts, is an important metric that shows the percentage of profit made on each L1 of the shareholders’ fund. It is used to measure the performance and efficiency of banks.

This shows how well the bank has used its shareholders’ resources to generate higher profits (return on average equity) more than its competitors.

Return on average equity (ROAE) is a financial ratio that measures a company’s performance based on its average outstanding equity.