Vetiva Capital Management Forecasts Core Banking to Propel Growth in 2024

Vetiva Capital Management, a Nigerian financial firm, anticipates that core banking will be a key driver of growth in the upcoming year. This outlook was shared by Olumide Sole, the Sub-Saharan banking research analyst at Vetiva Capital Management, during a recent interview on Arise TV.

Sole highlighted substantial growth in major banks such as Zenith, GTCO, and UBA, attributing it to significant gains from Forex evaluation in 2023. Exploring the impact of rising interest rates on the cost of funds, Sole emphasized, “As interest rates rise, banks also have to pay more interest rates for their customers’ deposits.”

Discussing the recent adjustment to the Standing Deposit Facility by the Central Bank of Nigeria, Sole noted the removal of the two billion limit for daily bank deposits. This change provides banks with increased earning potential for their revenue, particularly in core banking income. Sole explained, “Banks can now earn more as they can deposit all excess liquidity via the window.”

Touching on specific banks and their prospects, Sole mentioned Access as the largest bank by asset size, expected to continue growing. Regarding First Bank of Nigeria, he expressed optimism, citing the creation of more shares as a catalyst for the bank’s expansion.

Sole discussed the FCMB Group’s successful completion of additional tier one capital issuance, positioning the bank for increased loan offerings and expanded operations. Fidelity Bank’s notable expansion in the first margin and its acquisition of Union Bank UK were identified as positive factors for the bank’s earnings.

While acknowledging Stanbic’s dividend payout of the ₦1.5, unchanged from the previous year, Sole highlighted investor expectations. He also noted Stanbic Bank’s recent launch of a fintech subsidiary.

In summarizing the performance of banks, Sole highlighted UBA’s impressive year, marked by one of the largest recorded non-interest margins, expecting this to support the bank’s performance into 2024. Zenith Bank’s average 40% dividend payout was lauded as impressive, likely to continue supporting the bank’s performance in the stock market through 2024.