We have attempted to do a review of the banking sector performance following the recapitalization enacted by the financial regulators of all Deposit money banks in Nigeria.
This one pager should be read conjunctively with the detailed and comprehensive report attached .
The fall out is that the Nigerian economy is very resilient and we are on the right trajectory based on the various innovations being introduced by the Federal Government in recent times.
The report provides a comprehensive review of the Nigerian banking sector’s performance following the 2024–2026 recapitalization exercise and highlights the sector’s strong profitability, balance sheet expansion, market and evolving competitive structure. It notes that FY2025 marked a major transition from the FX-driven earnings of 2024 to a more sustainable earnings model built on core banking operations such as credit expansion, widened net interest margins, and strong retail deposit growth.
A total of ₦4.65 trillion was raised during the recapitalization period, with 72.55% sourced locally and the remainder from foreign institutional investors. The Central Bank of Nigeria recorded a 91% compliance rate, with 33 banks meeting or exceeding the new capital requirements. Banks relied mainly on rights issues, public offers, and private placements, while a few institutions downgraded their licenses to meet lower capital thresholds.
Sector-wide financial performance was exceptionally strong in FY2025. Gross earnings almost doubled from ₦12.45 trillion in 2024 to ₦24.80 trillion, while net interest income rose by 118.6% due to higher lending yields and relatively low funding costs. Profit before tax increased to ₦6.10 trillion, and total industry assets expanded to ₦153.6 trillion. Average Return on Equity (ROE) improved to 27.8%, although non-performing loans (NPLs) increased slightly to 4.8% because of macroeconomic pressures.
The report categorizes banks into three competitive tiers. Tier-1 institutions such as Zenith Bank Plc, Guaranty Trust Holding Company, and Access Holdings Plc maintained dominance through scale, treasury operations, and regional expansion. Tier-2 banks, particularly Wema Bank Plc and Stanbic IBTC Holdings, emerged as high-growth outperformers, delivering strong ROEs and efficient cost structures. Tier-3 institutions focused on niche markets such as trade finance, ethical banking, and corporate treasury services.
The report also highlights several risks for 2026, including the possibility of reckless lending as banks seek to deploy excess liquidity, potential margin compression if interest rates decline, and shareholder pressure to sustain earnings growth following significant equity dilution from recapitalization.
On the equity market side, the NGX Banking Index recorded a strong cumulative return of 111.23% between January 2024 and May 2026, closely tracking the broader NGX All Share Index, which returned 136.25%. However, the broader market outperformed banking stocks, suggesting increasing diversification of market leadership beyond financial services.
Overall, the report concludes that Nigerian banks remain resilient and profitable despite macroeconomic challenges. It expects investor focus in 2026 to shift toward operational efficiency, low-cost deposits, and asset quality management. GAM specifically identifies Wema Bank Plc and Stanbic IBTC Holdings as institutions best positioned to outperform peers due to their strong ROEs, efficient capital deployment, and scalable business models.
Tunde Sobamowo
Financial Advisor & Stockbroker
Disclaimer : PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS .INVESTORS ARE ADVISED TO SEEK PROFESSIONAL ADVICE BEFORE INVESTING IN STOCKS GENERALLY
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