Fidelity Bank Plc and Stanbic IBTC dropped from the tier -1 ranking to tier – 2 ranking, the 2023 edition of the Proshare Bank Strength Index, (PBSI) has revealed.
The report showed that the Ecobank Transnational Incorporated, joined the tier -1 ranking for the 2023 PBSI from the tier – 2 ranking in 2021/2022.
Also, Access Bank, Guaranty Trust Company, United Bank for Africa and Zenith Bank retained their ranking as tier 1 banks in the 2023 edition of the PBSI.
Proshare disclosed this during the official launch of the second edition of its ‘Tier 1 Bank Report’ in Lagos, recently.
The downgrading of Stanbic IBTC and Fidelity Bank from the tier 1 ranking to tier 11 followed the lenders inability to meet the required mark.
Proshare explained that the ranking was based on “the methodology deployed by the PBSI, which requires that banks/financial Holdcos over the 50th percentile are ranked as Tier 1, while those below the mark are categorised as Tier II and III, respectively.”
In its maiden edition of the “Tier 1 Banking Report” titled; ‘The Case for Redefining Tier 1 Banks’, the PBSI explained that in redefining tier 1 banks, the PBSI focused on measures of asset quality, profitability, and liquidity.
This has been broadened to cover efficiency ratios, risk management, and digital income to incorporate assets, gross earnings (in absolute terms and on logarithmic scales), capital adequacy ratio, loans deposit ratio, cost to income-ratio, cost of risk, net interest margin, non-performing loans ratio, digital income to gross earnings ratio, and independent non-executive directors to board ratio, the report added.
The report noted that dynamism would be a key feature for surviving business disruptions beyond 2023.
It further added: “In discussions with bank chief financial officers, Proshare’s researchers noted that if commercial lenders are not going to be trapped by the next wave of socioeconomic dislocations, they must be prepared to transition from rigid routines and fixed outlooks to less formal and hierarchical structures that allow for better internal collaboration and the breaking of operational walls.”
The report further noted that “a few banks may encounter difficulties, but many, especially tier 1 banks, will continue to thrive.”
The report assessed the full-year 2022 performance of the banks/financial Holdcos and incorporated the half-year 2023 results, considering the timing of the Tier 1 banking report release. It featured six sections and highlighted the following key areas: H1, 2023 Silicon Valley Bank crisis and impact on global banking, operations of Nigerian banks, revised 2021 PBSI and bank classifications. Also, the financial risk profile of Tier 1 and Tier 2 banks, the rise of tech foundries and digital income in the Nigerian banking industry and the recommendations for regulators.
The downgrading of Fidelity Bank is a major set back to its determination to be among the tier-1 banks in Nigeria come 2025.
On assumption of office as the Managing Director/Chief Executive Officer of Fidelity Bank Plc in 2021, Nneka Onyeali-Ikpe vowed that her target was to see the financial institution rise to be among the tier-one lenders by 2025.