GTBank, Stanbic Bank has the highest ROE and ROA in Q1 2018

Guaranty Trust Bank (GTBank) and Stanbic Bank have the highest Return of Equity and Return on Assets (ROA) among Nigerian banks in first quarter 2018.
GT Bank and Stanbic Bank recorded an ROA of 1.30 percent and 1.65 percent as at first quarter 0f 2018 respectively, however in terms of Return Of Equity(ROE) , Stanbic Bank had the highest of 12.10 percent while GT Bank had a 7.70 percent in first quarter 2018.
“GT Bank has had great success in Nigeria’s affluent segment, based on high service levels. It has been rated best in class in terms of CSAT, a measure of client experience,” Mckinsey Global consulting firm said in its 2018 report.
Mckinsey said African customers have a strong need for affordable financial solutions, which points directly to the second winning practice in African retail banking: targeting the right segments with compelling offers of which Nigeria GT Bank is a good example.
What this means is that these lenders are effective in turning the cash put into the business into greater gains and growth for the company and investors.
The higher the ROE, the more efficient the company’s operations utilises available funds while the ROA is a financial ratio that shows the percentage of profit a company earns in relation to its overall resources.
This is unsurprising as the share prices of the two lenders have been growing since last year and the rally has continued into 2018, and of course investors will buy into the stock of firms with strong earnings growth, excellent risk management strategy and solid capital buffers.
Both banks have a higher price to book ratio, which reflect greater expected future gains because of perceived growth opportunities and/or some competitive advantages and/or lesser risk.
GTBank and Stanbic bank are trading at 2x and 2.5x book values, while their shares gained.
According to the CBN’s stability report, the pre-shock ROA of the banking industry, large, medium and small banks were 0.25, 0.26, 0.22 and 0.18 per cent respectively, while the ROE of the banking industry, large, medium and small banks were 3.84, 3.53, -5.06 and 1.04 percent in June 2017.
Tier1 lenders otherwise known as the big banks in Africa’s most populous nation and largest economy have been navigating the storm of headwinds.
Income from interest income on loans and advances and short term government securities, excellent risk management strategy, solid capital buffers helped these lenders overcome legacy issues like the power sector loans.
The New York based consulting firm said although competition is heightening and regulation is tightening, there is still much room to grow as Africa’s retail banking penetration stands at just 38 per cent of GDP, half the global average for emerging markets.
Mckinsey cautions that Africa’s fast-growing, profitable banking markets, global media reports, are more likely to highlight Africa’s social and political problems than its rise as a business market.
 
DIPO OLADEHINDE & UJU IKEDIONU
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