Guaranty Trust Holding Company Plc, GTCO, and Stanbic-IBTC, continue to exploit efficiency and strong asset quality, the two critical success factors to gain leadership positions in the first tier and second tier banking categories respectively over the years .
Imperative of Efficiency and Strong Asset Quality in Banking.
In Nigeria’s banking sector, operational efficiency and asset quality are the twin pillars of success, distinguishing top performers from the rest. Strong asset quality is the backbone of a resilient banking business, reflecting a bank’s ability to manage risk and make prudent lending decisions. Two banks , Guaranty Trust Holding Company Plc, GTCO, and Stanbic-IBTC, have exploited these two critical success factors to gain leadership positions in the first tier and second tier banking categories respectively over the years .
A strong asset quality enables banks to weather economic downturns, maintain investor confidence, and capitalize on growth opportunities.By minimizing non-performing loans and optimizing risk-return tradeoffs, banks with strong asset quality can allocate capital more effectively, drive sustainable profitability, and reinforce their position in the market. In essence, strong asset quality is a testament to a bank’s financial health and its ability to navigate the complexities of the banking landscape.
.As regards the imperative of efficiency, the power of efficiency in banking is a crucial differentiator in Nigeria’s competitive financial landscape. Banks that excel in managing their costs relative to income tend to outperform their peers. The cost-to-income ratio (CIR) is a key metric that measures this efficiency, with lower ratios indicating better performance.
Together, these indices empower banks to navigate challenges, capitalize on opportunities, and drive sustainable growth, making them essential imperatives for banking leaders seeking to thrive in a competitive landscape.
Cost To Income Ratio As Critical Index of Efficiency
GTCO and Stanbic IBTC are prime examples of this, leveraging their efficiency and pristine asset quality to solidify their positions as banking leaders. GTCO’s profit before tax was ₦600.9 billion, driven by strong interest income and fee income growth. The bank’s cost-to-income ratio was 30.1%, showcasing exceptional operational efficiency. GTCO’s asset quality improved, with IFRS 9 Stage 3 Loans at 3.2% and Cost of Risk at 1.7%. The bank’s total assets reached ₦16.7 trillion, with shareholders’ funds at ₦3.0 trillion. GTCO declared an interim dividend of ₦1.00 per share ¹
Stanbic IBTC’s profit before tax was ₦243.7 billion, up 65.8% from H1 2024. The bank’s cost-to-income ratio improved to 41.3%. Net interest income surged 81.3% to ₦316.0 billion. Stanbic IBTC’s total assets grew 17.5% to ₦8.12 trillion, with customer deposits up 13.9% to ₦3.43 trillion. The bank declared an interim dividend of 250 kobo per share ².
. Wema Bank and Fidelity Bank have demonstrated strong operational efficiency, with CIRs of 47.56% and 50.80% respectively, showcasing their ability to manage costs effectively. FCMB has also shown improvement, with a CIR of 57%, indicating its efforts to optimize operations are yielding results.
Sterling Bank has made notable strides in enhancing its efficiency, with a CIR of 64.5% in H1 2025, down from 75.7% in H1 2024, reflecting the impact of its cost optimization measures. Banks with lower CIRs, like Wema and Fidelity, are better positioned to invest in growth initiatives, weather economic challenges, and deliver stronger returns to shareholders, underscoring the importance of efficiency in driving banking success.
Zero Forbearance and Strong Asset Quality That Deliver Industry Leadership
The Central Bank of Nigeria (CBN) has taken a significant step to strengthen the country’s banking sector by directing banks with unresolved forbearance loans to suspend dividend payments, defer executive bonuses, and halt offshore investments. This move aims to restore investor confidence, promote financial stability, and support Nigeria’s economic growth amidst challenges like a falling naira and rising debt costs.
Bank Forbearance Exposure % of Gross Loan Book
Zenith Bank $1.6 billion 23%
First Bank $887 million 14%
Access Bank $304 million 4%
Fidelity Bank $296 million 10%
FCMB $134 million 8%
UBA $282 million 6%
According to a report by Renaissance Capital (Rencap), six Nigerian banks hold approximately $3.52 billion in forbearance loans, with Zenith Bank, FirstBank, and Access Bank accounting for the largest portions. Specifically, these banks have significant forbearance exposures of 23%, 14%, and 4% of their gross loan books, respectively. The breakdown of these exposures is as follows: Zenith Bank has $1.6 billion (23% of gross loan book), First Bank has $887 million (14% of gross loan book), Access Bank has $304 million (4% of gross loan book), Fidelity Bank has $296 million (10% of gross loan book), FCMB has $134 million (8% of gross loan book), and UBA has $282 million (6% of gross loan book).
In contrast, GTCO and Stanbic IBTC have zero forbearance exposure, having provisioned fully by December 2024. GTCO, in particular, has adequately provisioned and written off its forbearance exposures, demonstrating robust risk management frameworks and prudent lending practices.
Consequently, the CBN’s directive is part of its broader financial stability and recapitalization framework, which aims to fortify Nigeria’s banking sector. Banks operating under the regulatory forbearance regime are expected to retain more earnings internally and reinforce their balance sheets. This development is likely to have several implications for the banking sector.
For instance, banks will focus on actual lending to productive sectors, improve operational efficiency, and invest in digital tools to stay competitive. Additionally, they will prioritize building robust capital buffers to absorb potential shocks and enhance their risk management frameworks to minimize forbearance exposures. However, banks with significant forbearance exposures may suspend dividend payments, affecting shareholder returns.
Ultimately, the CBN’s proactive approach is expected to promote a healthier banking sector, supporting Nigeria’s economic development. As the banking sector transitions out of regulatory forbearance, analysts anticipate a more transparent and resilient banking landscape, better aligned with international standards and investor expectations .
GTCO and Stanbic IBTC’s zero forbearance exposure is a testament to their exceptional risk management and lending practices. Their ability to maintain zero forbearance exposure demonstrates robust risk assessment and mitigation strategies, ensuring they’re well-equipped to handle potential credit risks. Consequently, this achievement positions them favorably with investors, showcasing transparency and strong asset quality.
Investors are more likely to trust banks with pristine asset quality, leading to increased confidence and potential investment. Furthermore, with zero forbearance exposure, they’re well-positioned to meet regulatory requirements, avoiding potential penalties or sanctions. This compliance also reflects their commitment to operating within established guidelines, which in turn, differentiates them from peers and serves as a competitive advantage.
As a result, this distinction can attract top talent, customers, and investors, further solidifying their market position. Ultimately, with strong asset quality, they’re poised to capitalize on growth opportunities, expanding loan portfolios and increasing market share, positioning them for long-term success and sustainability
