Access Holdings, FBNH, GTCO, others record FX revaluation gains

Access Holdings, FBNH, GTCO and nine other banks in the country recorded FX revaluation gains in the first half of 2023 following the devaluation of the Naira by the Central Bank of Nigeria (CBN).

The other affected banks are FCMB, Fidelity, Stanbic IBTC, Sterling Bank, UBA, Unity Bank, Wema Bank, and Zenith Bank.

The surge in FX revaluation gains can be attributed to the devaluation of the Naira, which reached N769.25/$ in June 2023, compared to its 2022 closing rate of N461.50/$.

According to the first half reports of the banks, cumulatively, the 11 banks made N1.7 trillion, a significant increase compared to the N66.559 billion they made in the first half of 2022.

UBA recorded the highest FX revaluation gain of N418.278 billion following the harmonization of the currency exchange rates in Nigeria.

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Similarly, GTCO, which recorded the second-highest FX revaluation gains of about N357.471 billion attributed it to the effect of exchange rate movement in the I&E Window from ₦461.5/$1 in December 2022 to ₦769.25 in June 2023 on the Group’s long USD1.15bn Position and an increase in the forward rates applied to revalue its US$563mm swap positions comprising 3 tranches with outstanding maturities ranging between 4 months to 1 year.

Access Holdings, FBNH, FCMB, Fidelity, etc., also recorded impressive growth in FX revaluation gains.

While several banks reported triple-digit expansion in their gross earnings, the remarkable surge in profit after tax (PAT) was largely fueled by substantial gains in foreign exchange (FX) revaluations.

The influence of FX revaluation gains on overall profitability was so pronounced that top-tier banks, even in the face of dwindling net interest income due to impairment charges, still managed to achieve double-digit growth in their bottom lines.

According to well-informed sources, the magnitude of the forex profits appears to have unsettled high-ranking officials at the Central Bank, prompting them to release a regulatory circular two weeks ago.

The CBN’s directive to banks, to set aside FX revaluation gains rather than using them for dividends or operational expenses, is undoubtedly a precautionary and prudent regulatory measure aimed at safeguarding the financial stability of the banks.